Decentralization of electric power is possible with the penetration of distributed generators (DGs) in the microgrid (MG) network. Reconfiguration of MG poses a key challenge in identifying suitable protection schemes for varying the topology of the network. In this paper, a central protection center (CPC) is incorporated whose function is to monitor the MG continuously, identify fault occurrence, and locate the exact faulted branch. The proposed Prim-aided Dijkstra algorithm executed continuously in the CPC is responsible for identifying the current topology of the network and aids in identifying the shortest route from the faulted point to the nearest operating source. The CPC is also responsible for adaptively varying the settings of the relays existing in the shortest path identified based on their selectivity levels. This heuristic algorithm is validated on IEEE 21-bus and 40-bus MG test systems for all possible topologies and faults. The proposed algorithm is capable of clearing the fault by disconnecting minimum portion of the network and ensuring continuity of supply to a majority of loads. © 2013 IEEE.