A method and a system for detecting stand-alone operation of a distributed generating system having a generating source connected in shunt with an independent power distribution system via a first branch breaker are proposed. A voltage or a frequency signal on the independent power distribution system is read. The wavelet transformation is performed on the voltage or frequency signal to form a time versus high-frequency component window and a time versus low-frequency component window for conveniently detecting the perturbation in the time domain of the signal. Next, whether the absolute value of the high-frequency component is greater than a threshold value and whether the duration is longer than another threshold value are determined. If both answers are yes, a stand-alone operation occurs. An alarm signal is immediately generated and sent to the first branch breaker to release the connection between the generating source and the power distribution system.