We introduce a unique system to achieve on-demand droplet merging and splitting using a perpendicular AC electric field. The working mechanism involves a micropillar to split droplets, followed by electrocoalescence using an AC electric field. Adjusting the parameters of the AC signal and conductivity of the fluid result in different merging regimes. We observed a minimum threshold voltage and a strong influence of the surfactant. We hypothesize that the merging process is caused by dipole–dipole coalescence between the daughter droplets. At the same time, adjustment of the conductivity reveals a shift in the merging regimes and can be explained with an electric circuit diagram. Size-based sorting using this merging phenomenon is subsequently demonstrated, where alternate, single, double, and triple droplets sorting were achieved. The concept presented in this paper is potentially useful for drug dispensing or multivolume digital polymerase chain reaction, as droplets of multiple sizes can be generated simultaneously.