This paper addresses a new methodology for the simultaneous optimal allocation of DSTATCOM and DG in radial distribution systems to maximize power loss reduction while maintaining better node voltage profiles under multilevel load profile. Cat Swarm Optimization (CSO) is one of the recently developed powerful swarm intelligence-based optimization techniques that mimics the natural behavior of cats but usually suffers from poor convergence and accuracy while subjected to large dimension problem. Therefore, an Improved CSO (ICSO) technique is proposed to efficiently solve the problem where the seeking mode of CSO is modified to enhance its exploitation potential. In addition, the problem search space is virtually squeezed by suggesting an intelligent search approach which smartly scans the problem search space. Further, the effect of network reconfiguration has also been investigated after optimally placing DSTATCOMs and DGs in the distribution network. The suggested measures enhance the convergence and accuracy of the algorithm without loss of diversity. The proposed method is investigated on 69-bus test distribution system and the application results are very promising for the operation of smart distribution systems.