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In recent times, the shrinkage of fossil fuel reserves and increase in greenhouse emissions have compelled to switch to suitable eco‐friendly solutions. Electric vehicles (EVs), being one such solution, have been the center of attraction for the industries as well as the researchers. This paper deals with the inclusion of plug‐in EVs (PEVs) in isolated microgrid (I‐MG). An intelligent demand‐side management approach has been proposed for co‐ordination of the power generation from distributed generators, battery energy storage systems (BESSs), and other forms of distributed energy resources (DERs) to fulfill the daily load demand as well as energy demand of EVs. Medium voltage I‐MG integrated with DERs, BESSs and PEVs has been used for the study and the analysis has been done to justify the need for smart charging of PEVs in an I‐MG. The proposed technique combines smart charging and demand response which simplifies the consumer’s concerns and provides a cost‐effective solution.