This paper presents the optimal scheduling of a diesel generator and an energy storage system (ESS) while using a detailed battery ESS energy efficiency model. Optimal scheduling has been hampered to date by the nonlinearity and complexity of the battery ESS. This is due to the battery ESS efficiency being a multiplication of inverter and battery efficiency and the dependency of an inverter and any associated battery efficiencies on load and charging and discharging. We propose a combined mixed-integer linear programming and particle swarm optimization (MILP-PSO) algorithm as a novel means of addressing these considerations. In the algorithm, MILP is used to find some initial points of PSO, so that it can find better solution. Moreover, some additional algorithms are added into PSO to modify and, hence, improve its ability of dealing with constraint conditions and the local minimum problem. The simulation results show that the proposed algorithm performs better than MILP and PSO alone for the practical microgrid. The results also indicated that simplification or neglect of ESS efficiency when applying MILP to scheduling may cause a constraint violation.