In this study, a novel method is presented to significantly improve stability in isolated microgrids. The approach involves enhancing the conventional droop controller technique by incorporating a power system stabilizer (PSS), which greatly enhances the performance of the controller. Designing an inverter-based autonomous microgrid system poses a challenge in selecting the appropriate gain for the conventional controller, as achieving fast power-sharing requires a high droop gain, but this can compromise system stability. To address this dilemma, a tradeoff is necessary in the design of the conventional droop controller. This paper tackles this challenge by developing a PSS specifically designed for inverter-based microgrids. The gain selection process is achieved through Genetic Algorithm Optimization, ensuring optimal performance. The PSS design is meticulously described step by step, utilizing a standard IEEE system microgrid as the reference model. To validate the effectiveness of the proposed controller, comprehensive time domain simulation analyses are conducted. The results demonstrate the significant improvements achieved in microgrid stability, establishing the efficacy of the developed approach.