This paper presents a new strategy for optimally placing Static Var Compensator (SVC) in power systems with a view to reduce the transmission line loss and to minimize the voltage deviation at the buses. The proposed strategy uses Firefly Algorithm (FFA) and identifies the optimal locations for the placement of SVC and its size. At present the modern power industry is facing the problem of voltage instability due to stressed conditions and heavy load. The main reason for the voltage instability is the inadequate reactive power at the load buses of the system. Simulation is performed on the IEEE 30 bus system using MATLAB software. Additional reactive power injected by the optimally placed FACTS device (SVC) in the load bus reduced the reactive power generation of the generators and decreased the transmission line losses. The results obtained from the firefly algorithm are compared with PSO and found to be better. © Research India Publications.