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A decentralized adaptive scheme is proposed for protection coordination of microgrids. In the proposed scheme, a set of agents around the fault location negotiate with each other to reach the best protection coordination strategy upon the occurrence of a fault. Adopting a protective layer, agents are arranged in a number of groups where the members in each group can interact with each other. Considering the operational uncertainties of the respective circuit breakers and communication links, the best fault clearance strategy is determined by analyzing the probability of correct operation of all proposed strategies and considering the least number of probable outages. This is done by calculating the fault currents flowing through the respective circuit breakers and the Latency of the communication links. The efficiency of the proposed scheme is demonstrated by comparing the simulation results of a sample network with those obtained using the conventional central adaptive protection approach.