The application of LCL filters has become popular for inverters connected to the power grid due to their advantages in harmonic current reductions. However, the power grid in a distribution system is non-ideal, presenting itself as a voltage source with significant impedance. This means that an inverter using an LCL filter may interact with other grid-connected inverters via the non-ideal grid. In this paper, damping optimization of LCL filters to reduce this interaction is studied for a three-phase voltage source inverter (VSI). Simulation results show that resonant oscillation occurs in a distributed power grid, even if the VSI with an LCL filter is well designed for standalone applications. A small-signal analysis is performed to predict this stability problem and to locate the boundary of the instability using an impedance approach. Based on these analytical results, optimized damping of the LCL filter can be designed. The oscillation phenomena and optimized damping design are verified by simulations and experimental measurements.