Traditional virtual synchronous generator (VSG) suffers from frequency steady-state deviation in islanded microgrids, which negatively affects the frequency-sensitive loads. Moreover, similar to the synchronous generator, VSG introduces active power oscillation, especially under the condition of multiple parallel VSGs, which may cause overload or damage to the VSG because of its low overcurrent capability as a power electronic inverter. To address these issues, a decentralized frequency restoration and power oscillation damping control method is proposed in this paper, in which the global variable characteristic of the microgrid frequency is considered to restore it to the rated value while ensuring precise active power sharing. Moreover, the proposed control method can dampen the power oscillation during load disturbance without affecting the steady-state characteristics. In addition, the fully decentralized manner obviates the requirement for communication networks, thereby considerably reducing the communication burden and improving system reliability. Finally, simulations and experiments are conducted to validate the effectiveness of the proposed control method.