This paper presents a new combined technique for minimizing the power loss in distribution system by optimal Distributed Generation (DG) installation together with capacitor placement. Sensitivity analysis is used to identify the optimal candidate locations of DGs and capacitor placement. Bacterial Foraging Optimization Algorithm (BFOA) is applied to find the optimal size of DGs and capacitors. BFOA is a swarm intelligence technique which models the individual and group foraging policies of the E. coli bacteria as a distributed optimization process. The technical constraints of voltage and branch current carrying capacity are included in the assessment of the objective function. Different cases of DG and capacitor placement are considered to assess the performance of the proposed method. Proposed method has been tested on IEEE 33-bus radial distribution system and the results obtained are encouraging. © 2014 IEEE.