This paper proposes a supervisory power management system (PMS) for a grid interactive microgrid with a hybrid energy storage system. The key feature of the proposed PMS is reduced number of sensors required to implement the PMS. The PMS considers renewable power variation, grid availability, electricity pricing, and changes in local loads. It can detect the operating mode of system without measuring load currents and powers. A single-phase voltage source converter (VSC) transfers real power between dc grid and utility grid besides offering ancillary services such as harmonic mitigation, reactive power support, and unity power factor at the point of common coupling (PCC). In the proposed system, a better dc-link voltage regulation is achieved and the usage of supercapacitors reduces the current stress on the battery. The PMS also addresses extreme operating conditions such as load shedding, offmaximum power point tracking operation of photovoltaic, elimination of critical oscillation of hybrid energy storage systems power, islanded operation, and resynchronization with grid. The performance of the proposed PMS is verified by digital simulation and experimental studies. © 2017 IEEE.