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Smart grid is an intelligent power generation, distribution, and control system. ZigBee, as a wireless mesh networking scheme low in cost, power, data rate, and complexity, is ideal for smart grid applications, e.g., real-time system monitoring, load control, and building automation. Unfortunately, almost all ZigBee channels overlap with wireless local area network (WLAN) channels, resulting in severe performance degradation due to interference. In this paper, we aim to develop practical ZigBee deployment guideline under the interference of WLAN. We identify the “Safe Distance” and “Safe Offset Frequency” using a comprehensive approach including theoretical analysis, software simulation, and empirical measurement. In addition, we propose a frequency agility-based interference avoidance algorithm. The proposed algorithm can detect interference and adaptively switch nodes to “safe” channel to dynamically avoid WLAN interference with small latency and small energy consumption. Our proposed scheme is implemented with a Meshnetics ZigBit Development Kit and its performance is empirically evaluated in terms of the packet error rate (PER) using a ZigBee and Wi-Fi coexistence test bed. It is shown that the empirical results agree with our analytical results. The measurements demonstrate that our design guideline can efficiently mitigate the effect of WiFi interference and enhance the performance of ZigBee networks.