Correct and fast detection of a micro-grid (MG) islanding is essential to the MG since operation, control and protection of the MG depend on an operating mode i.e., an interconnected mode or an islanding mode. When islanding occurs, the frequency of the point of common coupling (PCC) is not the nominal frequency during the transient state owing to the frequency rise or drop of generators in the MG. Thus, the active and reactive power calculated by the frequency domain based method such as Fourier Transform might contain some errors. This paper proposes an islanding detection algorithm for the MG based on the instantaneous active and reactive powers delivered to the dedicated line in the time domain. During the islanding mode, the instantaneous active and reactive powers delivered to the dedicated line are constants, which depend on the voltage of the PCC and the impedance of the dedicated line. In this paper, the instantaneous active and reactive powers are calculated in the time domain and used to detect islanding. The performance of the proposed algorithm is verified under various scenarios including islanding conditions, fault conditions and load variation using the PSCAD/EMTDC simulator. The results indicate that the algorithm successfully detects islanding for the MG.