Objectives Minimal extrathyroid extension (mETE) was removed from the TNM staging system. This study was designed prospectively to compare the safety and efficacy of microwave ablation (MWA) versus surgery for treating T1N0M0 papillary thyroid carcinomas (PTC) with sonographically detected mETE. Methods From December 2019 to April 2021, 198 patients with T1N0M0 mETE-PTCs evaluated by preoperative ultrasound from 10 hospitals were included. Ninety-two patients elected MWA, and 106 patients elected surgery for treatment. MWA was performed using extensive ablation with hydrodissection. Surgery consisted of lobectomy with ipsilateral central lymph node dissection (CLD), lobe and isthmus excision with ipsilateral CLD and total thyroidectomy with ipsilateral CLD. The rates of technical success, cost, oncologic outcomes, complications and quality of life of the two groups were assessed. Results The follow-up times for the MWA and surgery groups were 12.7 +/- 4.1 and 12.6 +/- 5.0 months, respectively. The technical success rate was 100% for both groups. Oncological outcomes of the two groups were similar during the follow-up (all p > 0.05). The MWA group had a shorter operation time, less blood loss and lower costs (all p < 0.001). Three complications (3.3%) were reported in the MWA group and 4 (3.8%) in the surgery group (p = 0.846). The surgery group had higher scores for scar problems and anxiety (p < 0.001 and p = 0.003, respectively). Conclusions Microwave ablation was comparable in the short term to surgery in terms of treatment safety and efficacy in selected patients with T1N0M0 mETE-PTC detected by ultrasound.