Microgrid deployment in electric grids improves reliability, efficiency, and quality, as well as the overall sustainability and resiliency of the grid. Specifically, microgrids alleviate the effects of power outages. However, microgrid implementations impose additional challenges on power systems. Microgrid protection is one of the technical challenges implicit in the deployment of microgrids. These challenges occur as a result of the unique properties of microgrid networks in comparison to traditional electrical networks. Differential protection is a fast, selective, and sensitive technique. Additionally, it offers a viable solution to microgrid protection concerns. The differential zone protection scheme is a cost-effective variant of differential protection. To implement a differential zone protection scheme, the network must be split into different protection zones. The reliability of this protection scheme is dependent upon the number of protective zones developed. This thesis proposes a new differential zone protection scheme using a graph partitioning algorithm. A graph partitioning algorithm is used to partition the microgrid into multiple protective zones. The IEEE 13-node microgrid is used to demonstrate the proposed protection scheme. The protection scheme is validated with MATLAB Simulink, and its impact is simulated with DIgSILENT PowerFactory software. Additionally, a comprehensive comparison was made to a comparable differential zone protection scheme. / Master of Science / A microgrid is a group of connected distributed energy resources (DERs) with the loads to be served that acts as a local electrical network. In electric grids, microgrid implementation enhances grid reliability, efficiency, and quality, as well as the system's overall sustainability and resiliency. Microgrids mitigate the consequences of power disruptions. Microgrid solutions, on the other hand, bring extra obstacles to power systems. One of the technological issues inherent in the implementation of microgrids is microgrid protection. These difficulties arise as a result of microgrid networks' distinct characteristics as compared to standard electrical networks. Differential protection is a technique that is fast, selective, and sensitive. It also provides a feasible solution to microgrid protection problems. This protection scheme, on the other hand, is more expensive than others. The differential zone protection scheme is a cost-effective variation of differential protection that lowers protection scheme expenses while improving system reliability. The network must be divided into different protection zones in order to deploy a differential zone protection scheme. The number of protective zones generated determines the reliability of this protection method. Using a network partitioning technique, this thesis presents a new differential zone protection scheme. The microgrid is divided into various protection zones using a graph partitioning algorithm. The proposed protection scheme is demonstrated using the IEEE 13-node microgrid. MATLAB Simulink is used to validate the protection scheme, while DIgSILENT PowerFactory is used to simulate its impact. A comparison of a similar differential zone protection scheme was also done.