In this paper, a comprehensive protection strategy is proposed for insuring dependable and secure operation of an islanded microgrid system. This is implemented using microprocessor-based relays to prevent unnecessary loss of critical loads and distributed generators (DGs). Several improvements are proposed to clear the way for plug-and-play of DGs. Furthermore, recommendations are presented to tackle the elusive high-impedance fault problem, commonly encountered in distribution systems. An optimal directional overcurrent bus protection is also presented. Several case studies and analyses are carried out to demonstrate the proposed protection strategy. Results from simulation using MATLAB/Simulink are also shown.