This paper proposes a distributed control strategy for voltage and reactive power regulation in ac Microgrids. First, the control module introduces a voltage regulator that maintains the average voltage of the system on the rated value, keeping all bus voltages within an acceptable range. Dynamic consensus protocol is used to estimate the average voltage across the Microgrid. This estimation is further utilized by the voltage regulator to elevate/lower the voltage-reactive power (Q-E) droop characteristic, compensating the drop caused by the droop mechanism. The second module, the reactive power regulator, dynamically fine-tunes the Q-E coefficients to handle the proportional reactive power sharing. Accordingly, locally supplied reactive power of any source is compared with neighbor sources and the local droop coefficient is adjusted to mitigate and, ultimately, eliminate the load mismatch. The proposed controllers are fully distributed; i.e., each source requires information exchange with only a few other sources, those in direct contact through the communication infrastructure. A Microgrid test bench is used to verify the proposed control methodology, where different test scenarios such as load change, link failure, and inverter outage are carried out.