This article presents an analysis of grid connection of an excited induction generator, where an inrush current is significantly reduced and voltage drop in the local grid is eliminated. In the proposed method, generator connection to the grid is done at the moment when the generator voltage vector equals the grid voltage vector, but the generator frequency differs from the grid frequency. Excitation of the induction generator is provided by a power electronic converter, which is rated only on the rated reactive power of the generator. Moreover, when the generator is connected to the grid, the converter satisfies reactive power demand of an induction generator, according to the requirements from the distribution system operator. The simulation and laboratory tests were conducted with a 7.5 kW induction generator.