A decentralized secondary control approach is proposed to compensate voltage deviations and to improve reactive power sharing accuracy in islanded microgrids. A state observer according to Kalman filter theory is designed based on a reduced order small-signal model to estimate reactive power and system voltages through local measurements without using communication system. An optimal tuning algorithm is used to tune PI controller in voltage control loop and a regularly tuned PI controller is used for compensating reactive power error. The effectiveness of the proposed control strategy is verified by the simulation of a microgrid test system in SIMULINK/ Simscape toolbox.