Summary This work introduces an optimized wavelet designed by fractionally delaying the coefficients of the unit delay filter. The wavelets produced by optimized fractionally delayed filter coefficients are named as fraclets. Fraclet has been utilized in the real-time power quality events' detection and classification which has been hitherto addressed with the help of unit delay filters. Normal signal, voltage sag, swell, harmonics, sag with harmonics, swell with harmonics, sag and swell with harmonics, and sag and swell with interruption are considered in this work to validate the performance of proposed algorithm based on fraclet. Along with real-time generation of various power quality events with TMS320C6748 DSP board, different events have also been simulated by using parametric equations. The upper hand of fraclets over wavelets has been highlighted by maximally flat frequency response of fraclets. Moreover, fraclets facilitate better multiresolution analysis by providing low energy compaction ratio (ECR). Further, 11 characteristic features have also been extracted from each decomposition level of PQ signal up to fifth level and fed to the modified probabilistic neural network (MPNN) for validating the proposed power quality event detection and classification algorithm. MPNN has outperformed the support vector machine (SVM), both with fraclet and wavelet. The proposed algorithm relying on fraclets has shown better results as compared with wavelet.