Wind diesel isolated microgrids (WDIMs) combine wind turbine generators (WTGs) with diesel generators (DGs) to supply electricity to remote consumers. WDIMs are low-inertia isolated power systems where large system frequency and voltage variations occur. WDIM dynamic modeling allows short-term simulations to be performed and detailed electrical variable transients to be obtained so that the WDIM power quality and stability can be tested. This paper presents a literature review about WDIM dynamic simulation. The review classifies articles according to factors such as the different WDIM operation modes (diesel only, wind−diesel and wind only) simulated, the types of WTGs used in the WDIM (constant- and variable-speed types), or the use of different short-term energy storage technologies (batteries, ultracapacitors, flywheels) to improve the WDIM power quality, stability and reliability. Papers about the dynamic simulation of related isolated microgrids are also reviewed. Finally, as an example of WDIM dynamic simulation, a WDIM with one WTG, one DG, load and a discrete dump load (DL) is modeled and simulated. The WDIM response to variations of wind speed and load consumption is shown by graphs of the main electrical variables. The simulations show how the DL is used to improve the WDIM stability and reliability.