To find a sustainable municipal solid waste (MSW) management and renewable electricity generation system is need of the hour. In modern hybrid electricity generation systems, the use of MSW on priority is not evaluated yet. To satisfy this need, a small scale MSW based microgrid is proposed and evaluated in economic and reliability terms. First, the waste of the selected city is characterized considering four seasons summer, spring, autumn and winter for a complete year. Then a microgrid system is designed using MSW processing techniques namely, anaerobic digestion (AD) and gasification that are further integrated with solar photovoltaic (PV) system, battery and the main grid. The size of the microgrid is optimized using an artificial bee colony (ABC) algorithm targeting the configuration that meets the desired system reliability requirements with minimum cost. The proposed system found as a sustainable approach to process the MSW of a small city (0.1 million population) and a reliable mean to fulfill the electricity demand of a village having 225 houses in India. The annualized system cost (ASC) of the proposed hybrid system found to be INR 5760919 with levelized cost of electricity (LCOE) 5.65 INR/kWh (0.0737 USD/kWh). The total MSW landfilling avoided cost is 451898.9 INR/year that is 17% of its processing cost.