Functional connectivity (FC) is among the most informative features derived from EEG. However, the most straightforward sensor-space analysis of FC is unreliable owing to volume conductance effects. An alternative-source-space analysis of FC-is optimal for high- and mid-density EEG (hdEEG, mdEEG); however, it is questionable for widely used low-density EEG (ldEEG) because of inadequate surface sampling. Here, using simulations, we investigate the performance of the two source FC methods, the inverse-based source FC (ISFC) and the cortical partial coherence (CPC). To examine the effects of localization errors of the inverse method on the FC estimation, we simulated an oscillatory source with varying locations and SNRs. To compare the FC estimations by the two methods, we simulated two synchronized sources with varying between-source distance and SNR. The simulations were implemented for hdEEG, mdEEG, and ldEEG. We showed that the performance of both methods deteriorates for deep sources owing to their inaccurate localization and smoothing. The accuracy of both methods improves with the increasing between-source distance. The best ISFC performance was achieved using hd/mdEEG, while the best CPC performance was observed with ldEEG. In conclusion, with hdEEG, ISFC outperforms CPC and therefore should be the preferred method. In the studies based on ldEEG, the CPC is a method of choice.