The purpose of the present study was to develop and optimize sertaconazole microemulsion-loaded hydrogel (STZ ME G) to enhance the dermal delivery and skin retention of the drug. Following screening of various oils for maximum drug solubility, 12 pseudoternary phase diagrams were constructed using oils (Peceol, Capryol 90), surfactants (Tween 80, Cremophor EL), a cosurfactant (Transcutol P) and water. A 2 × 3 × 2 × 3 full factorial design was employed to optimize a ME of desirable characteristics. The MEs were formulated by varying the oil type, oil concentration, surfactant type and surfactant: cosurfactant ratio. Optimized ME formulae F22 [5% Peceol, 55% Tween 80: Transcutol (1:2), 40% water] and F31 [5% Peceol, 55% Cremophor EL: Transcutol (1:2), 40% water] acquired mean droplet size of 75.21 and 8.68 nm, and zeta potential of 34.65 and 24.05 mV, respectively. Since F22 showed higher STZ skin retention during ex vivo studies (686.47 μg/cm) than F31 (338.11 μg/cm); hence it was incorporated in 0.5% Carbopol 934 gel to augment STZ skin retention capability. STZ ME G exhibited higher STZ skin retention (1086.1 μg/cm) than the marketed product "Dermofix cream" (270.3 μg/cm). The antimycotic activity against C.albicans revealed increased zones of inhibition for F22 and STZ ME G (35.75 and 30.5 mm, respectively) compared to Dermofix cream (26 mm). No histopathological changes were observed following topical application of STZ ME G on rats' skin (n = 9). Overall, the obtained results confirmed that the fabricated formulation could be a promising vehicle for the dermal delivery of STZ.