Renewable energy sources (RESs) offer a promising prospect for covering the fundamental needs of electricity for remote and isolated regions. To serve the customers with high power quality and reliability, design optimization methodology and a possible power management strategy (PMS) for wind-diesel-battery-converter hybrid renewable energy system (HRES) is proposed in this paper. The analysis is applied to a real case study of a standalone residential load located in a remote rural area in Pakistan. Firstly, optimal component sizing is investigated according to actual meteorological and load profile data. Different hybrid configurations are modeled, analyzed, and compared in terms of their technical, economic and environmental metrics with the aid of HOMER® software. The main objective is to determine the most feasible and cost-effective solution with least life-cycle cost, keeping in view the impact of carbon emissions. Secondly, a suitable PMS based on the state of charge (SOC) of the battery is proposed and implemented in MATLAB/Simulink® software for the designed HRES. The PMS is targeted to maintain load balance and extract maximum wind power while keeping the battery SOC within the safe range. Model predictive control (MPC) approach is applied to improve the output voltage profile and reduce the total harmonic distortion (THD). The boost converter is used for maximum power extraction from the wind. The DC-DC buck-boost battery controller is utilized to stabilize the DC bus voltage. The design optimization results show that the hybridization of wind, battery, and converter presents optimal configuration plan with minimum values of total net present cost (14,846 $) and cost of energy (0.309 $/kWh), which means 76.7% reduction in both total system cost and energy cost and 100% saving in harmful emissions when compared to the base case using diesel generator. The proposed system is able to support hundred percent of the load demand with excess energy of 30.1%. Performance analysis of PMS under variable load and fluctuating wind power generation is tested, and promising results with efficient load voltage profile is observed. Further, THD is reduced significantly to 0.26% as compared to 2.62% when the conventional PI controller is used. The output of this work is expected to open a new horizon for researchers, system planners for efficient design and utilization of HRES to curb drastic increase in load demand for urban as well as rural areas.