The application of underground cables and shunt capacitor banks may introduce power distribution system resonances. In this paper, the impacts of voltage-controlled and current-controlled distributed generation (DG) units to microgrid resonance propagation are compared. It can be seen that a conventional voltage-controlled DG unit with an LC filter has a short-circuit feature at the selected harmonic frequencies, while a current-controlled DG unit presents an open-circuit characteristic. Due to different behaviors at harmonic frequencies, specific harmonic mitigation methods shall be developed for current-controlled and voltage-controlled DG units, respectively. This paper also focuses on developing a voltage-controlled DG unit-based active harmonic damping method for grid-connected and islanding microgrid systems. An improved virtual impedance control method with a virtual damping resistor and a nonlinear virtual capacitor is proposed. The nonlinear virtual capacitor is used to compensate the harmonic voltage drop on the grid-side inductor of a DG unit LCL filter. The virtual resistor is mainly responsible for microgrid resonance damping. The effectiveness of the proposed damping method is examined using both a single DG unit and multiple parallel DG units.