Optimal location and size of distributed generation (DG) in the distribution system play a significant role in minimizing power losses, operational cost and improving voltage stability. This paper presents a new approach to find the optimal location and size of DG with an objective of minimizing network power losses, operational costs and improving voltage stability. Loss sensitivity factor is used to identify the optimal locations for installation of DG units. Bacterial Foraging Optimization Algorithm (BFOA) is used to find the optimal size of DG. BFOA is a swarm intelligence technique which models the individual and group foraging policies of the Escherichia 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. The proposed method has been tested on IEEE 33-bus and 69-bus radial distribution systems with various load models at different load levels to demonstrate the performance and effectiveness of the technique. © 2013 Elsevier B.V. © 2014 Elsevier Inc. © 2013ElsevierB.V. Allrightsreserved.