This paper presents optimal control of static synchronous compensator (STATCOM) intended for the application in isolated microgrids using genetic optimizers. The main objectives are to enhance the microgrid stability and reduce the oscillations in voltage, power, and frequency at different operating conditions. The proposed microgrid is a hybrid power system consisting of a diesel generator and a wind turbine each rated at 500 kW. The microgrid is supplying standalone static/dynamic loads rated at 500 kW. The wind turbine unit is controlled to operate at maximum power point tracking (MPPT). The diesel unit is used for ensuring the generation-demand equilibrium is maintained particularly under low wind speeds. The paper mainly discusses the voltage and frequency regulation of the isolated microgrid at different conditions such as: sudden changes in wind speed and/or load variations. Moreover, the proposed microgrid operation is examined under abnormal three-phase short circuit condition at the point of common coupling (PCC). To guarantee the microgrid voltage and frequency regulation at these diverse operating conditions, an optimally controlled STATCOM is considered as a reactive power source. The multi-objective genetic algorithm (GA) is used to obtain the optimal scheduling of the STATCOM controller’s gains without any delay in the control signal. From the simulation results, using Matlab™, the performance of the microgrid is improved and the oscillations in voltage, frequency, and power are reduced. The microgrid stability is enhanced using STATCOM device.