Deployment of a hybrid wireless and local area network (LAN) system is a feasible solution for smart grid communication. In this paper, a combination of fixed worldwide interoperability for microwave access (WiMAX) at 5.8 GHz and Ethernet LAN is proposed for monitoring and control of energy meters in a smart grid. Communication signal quality is an important factor to consider as it directly affects the reliability of the whole monitoring and control system of a smart grid. In this paper, the signal quality in terms of received signal strength indicator (RSSI) of the WiMAX system is investigated with a laboratory-scale smart grid prototype. Real-time RSSI is recorded and analyzed to develop an analytical model for the WiMAX RSSI transmitting at 5.8 GHz. It was found that in order to achieve reliable communication for a coverage area of 2 km, the base station has to transmit at a total power of 28.08 dBm for a receiver height of 1.875 m. Similarly, a receiver height of 2.766 m is required for a transmitted power of 25 dBm. The performance of the proposed WiMAX-LAN communication system for advanced metering infrastructure in smart grids is analyzed. On average, the proposed system completes the data collection of 3705 meter units in less than 997 s.