This paper presents an improved droop control strategy for the advanced traction power supply system (ATPSS). First, we present the ATPSS, whose main feature is the elimination of the neutral sections, which connects the entire AC traction network of the traction power supply system. We also analyze the characteristics of this system compared with other isolated grids. Fluctuations in load position will lead to frequency deviation and power coordination problems. Then, an improved droop control strategy for frequency recovery and reactive power optimization based on multilevel control is proposed. Frequency and reactive power correction signals are sent from the central controller to each traction substation. To reduce line loss, a minimum line loss curve is obtained based on the relationship between active power and line loss, and the active power distribution is adjusted by secondary control. Finally, simulation and experimental results are given to validate the proposed control strategy, which optimizes power coordination, recover system frequency, and reduce line loss.