This paper presents an impedance based stability criterion of cascaded active converter systems with bi-directional power flow from the perspective of individual subsystems. Influence of bi-directional power flow on the impedance of the subsystems and the stability of the cascaded system are studied. Though bi-directional power flow does not change the stability criterion, it changes the impedance (mostly the phase) of the susbsystems. Unstable critical frequencies caused by impedance interaction are predicted by the proposed impedance criterion in bi-directional power flow situation. Simulation results of a cascaded system comprising of a dual active bridge (DAB) dc-dc stage and a H bridge dc-ac stage are presented as an example to verify the analysis of the influence of bi-directional power flow. The small signal impedance on the dc side of the single phase H bridge is calculated based on power balance analysis. Controller improvement approaches to eliminate impedance interaction between subsystems are discussed.