Affordable and clean energy for any rural community is crucial for the sustainable development of the community and the nation at large. The utilization of diesel-based power generation is one of the barriers to the sustainable development of these communities. Such generations require fuel that has a volatile market price and emits massive greenhouse gas emissions. This paper presents the design, modeling, and simulation of a hybrid power system for a rural area in the Sultanate of Oman that aims to reduce daily consumption of diesel fuel and greenhouse gas emissions. Hybrid Optimization of Multiple Energy Resources (HOMER) is utilized to model multiple energy mix hybrid systems and to propose the best optimal energy mix system for a selected community. In addition, Electrical Transient Analyzer Program (ETAP) software is employed to assess hybrid system operational performances, such as bus voltage profiles and active and reactive power losses. This study revealed that the PV–wind–diesel system is the optimal energy mix hybrid microgrid for the Al-Dhafrat rural area in Oman, with a net present cost of USD 14.09 million. Compared to the currently operating diesel-based system, the deployment of this microgrid can reduce the levelized cost of energy, diesel fuel consumption, and greenhouse gas emissions per year by 54.56%, 70.44%, and 70.40%, respectively. This study confirms that the Sultanate of Oman has a substantial opportunity to install a hybrid microgrid system for rural diesel-based communities to achieve sustainable development in the country.