A large number of renewable distributed generation (DG) systems connect to the distribution network, affecting the structure of the traditional distribution network and forming an active distribution network (ADN). Although the accelerating grid penetration of DGs brings significant challenges to the distribution network operation, the islanded operation capability of DGs provides a flexible solution to the self‐healing of ADNs from faults. To ensure that ADN can quickly recover and reconfigure in the event of a fault and continue to maintain safe, economical, and reliable operation, this paper proposes a dynamic microgrid formation method for ADNs combined with the dynamic network reconfiguration and intentional islanding operation of DGs. An optimization model is designed to represent the proposed self‐healing method, maximizing the load restoration and minimizing the DG cost, line network loss, and voltage excursion simultaneously. A binary hybrid optimization solver is applied to pursue the optimal self‐healing schedules from the optimization model. The self‐healing method is evaluated on the Institute of Electrical and Electronics Engineers (IEEE) 33‐node system and the IEEE 123‐node system, which indicate its rationality and effectiveness fully verified. By optimizing the on and off states of the normally open switches and the on‐grid and off‐grid operation states of DGs, ADNs not only get healed with minimum load curtailment, but also achieve minimal DG generation cost, network loss, and node voltage deviation. In addition, compared with traditional solvers, the proposed solver has a slightly higher computational time than the corresponding solver.