Theoperating condition of a droop-based microgrid is dependent on the distributed generation (DG) droop characteristics. Both primary and secondary controls define the droop characteristic. Previous work dealing with droop-based microgrids overlooked the secondary control region boundary limits while optimizing the droop characteristics as well as the optimal selection of droop type. This article proposes a novel problem formulation that determines the optimal droop type as well as characteristic. Each DG is equipped with two operational control modes namely the <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">P</i> – <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">f</i> / <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">Q</i> – <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">V</i> and <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">P</i> – <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">V</i> / <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">Q</i> – <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">f</i> , one of which is optimally selected to achieve the desired operational objectives. The proposed model is formulated as a multiobjective mixed-integer nonlinear programming, which is incorporated into an optimal power flow framework and tested on a 38-bus distribution system modified to form a microgrid and optimally solved using general algebraic modeling system. A secondary control operating region is defined within which the optimal droops are constrained to maintain all possible operating conditions within the acceptable frequency and voltage limits. Furthermore, a comparative analysis is conducted where the DG droops are optimized with and without considering the proposed secondary control operating region. The dynamic performance of the proposed optimal secondary control is validated using PSCAD/EMTDC.