This paper addresses the impact of high wind power penetration level on damping of the electromechanical modes of oscillation and design of a power oscillation damping (POD) controller for doubly fed induction generator (DFIG)-based wind farm. An auxiliary control loop has been added to rotor side converter (RSC) in the form of cascade control with outer active/reactive power control and inner rotor current control loops. It is shown that this residue-based POD controller significantly improves the inter-area oscillation damping. The validity and effectiveness of the proposed controller are demonstrated on four-machine two-area test system that combines conventional synchronous generators and wind farms using simulations. Numerical results including modal analysis and time domain simulation are presented to illustrate the capabilities and contributions of the proposed controller to network dynamic performance. The main contributions of this paper are (i) the determination of the dominant interarea oscillations of the power systems, (ii) design of reduced order controllers for power damping oscillations, and (iii) increased renewable energy penetration with enhanced stability.