The reduction in the display chip size of micro light emitting diode (Micro-LED) exerts a sidewall effect and consequently results in a decreased forward light extraction efficiency (LEE). The display chip structure of Micro-LED with high LEE still needs to be further studied. For this reason, an optimized model of GaN-based Micro-LED with high LEE is explored by leveraging the finite-difference time-domain method from a simulation perspective. Specifically, the initial laminated structure of GaN-based Micro-LED with vertical sidewalls is constructed, and the influence of the sidewall effect on LEE is analyzed quantitatively. Then, the impact of the position change of multiple-quantum-well active layer in Micro-LED on the light output effect is investigated, and Micro-LED structure models with different inclined sidewall angles are analyzed. The influence of the bottom reflective material on LEE is discussed, and the parameters of the preliminarily optimized GaN-based Micro-LED model are obtained. Finally, LEE is further improved by designing a top transmission grating, and the effects of period, height, and duty cycle on LEE are examined. The results show that the overall LEE of the optimized GaN-based Micro-LED is 2.42 times higher than that of the initial structure.