Microgrids are embryonic as inspiring solution to the various concerns such as environmental, economic, depletion of the resources for the fuel availability and power mismatch. Microgrids are going to become one of the core components of the upcoming power system. So, it is essential to understand various issues and challenges in microgrid. Power management, constant voltage and frequency, control of various distributed generators and Protection of the microgrid are major areas of concern. Not much work has been done on the protection side of the microgrid. Detecting fault and obtaining the appropriate setting of the protective gear for unconventional topology of the microgrid is very challenging. In this work a solution has been proposed and implemented in microgrid controller (MGC) for fault detection and classification in a microgrid. Effectiveness of proposed method is tested in MATLAB /SIMULINK environment.