Nowadays, isolated microgrids formed by distributed generators based on renewable energy sources and power electronic converters have become more and more popular. There has been a lot of research for improving the stability of microgrids in recent years particularly the virtual synchronous generator (VSG) is a topic of great interest. This paper presents the stability analysis of an isolated microgrid based on wind-photovoltaic-diesel hybrid energy sources with the introduction of a proposed VSG. The proposed VSG is based on a battery-supercapacitor (SC) hybrid energy storage system aiming to maintain the stability of the studied isolated microgrid under disturbance conditions. The time-domain simulation results of the studied system under various disturbance conditions are examined to evaluate the effectiveness of the proposed VSG. It can be concluded from the simulation results that the proposed VSG can effectively compensate power fluctuations and maintain the stability of the studied microgrid under various disturbance conditions. The simulation results also show that while the battery can handle the long-term power variations, the SC can absorb the rapid power fluctuations. Thus, the proposed VSG based on a combination of the battery and the SC could improve the battery’s lifetime and reduce the invested cost of the SC.