Unified power flow controller (UPFC) is one among the versatile devices from the FACTS family that has a great potential to enable power system engineers maintain the required security level of a large power systems that are interconnected by controlling the amount of active and/or reactive power flow. Identification of suitable location for installing this costly device is relatively very difficult task. Various criteria need to be satisfied before selecting the location for installation of UPFC. In this paper, a novel method is proposed which identifies the best location for UPFC placement based on the net reduction in the critical bus ranking index under various line outage contingencies. The proposed method was implemented on a 5-bus system. The UPFC was placed at the identified location and it is found that the installation of UPFC has reduced the criticality of the selected bus and it also enhanced the voltage stability margin of the system under selected line outage contingencies. © 2020, Springer Nature Singapore Pte Ltd.