ABSTRACT To minimize power losses, it is important to determine the location and size of local generators to be placed in unbalanced power distribution systems. Because of some inherent features of unbalanced distribution systems, such as radial structure, large number of nodes, and a wide range of X/R ratios, the conventional techniques developed for the transmission systems generally fail to determine optimum size and location for distributed generation (DG). This article presents a simple method for investigating the problem of contemporaneously choosing the best location and capacity of DG in three-phase unbalanced radial distribution systems (URDS) for power loss minimization and to improve the voltage profile of the system. The best DG location is determined by using voltage index analysis, and capacity of DG is computed by a variational technique algorithm according to the available standard capacity of DG. This article presents the results of simulations for 25-bus and IEEE 37-bus unbalanced radial distribution system.