In recent years, the power industry has experienced significant changes on the distribution power system primarily due to the implementation of smart-grid technology and the incremental implementation of distributed generation. Distributed Generation (DG) is simply defined as the decentralization of power plants by placing smaller generating units closer to the point of consumption, traditionally ten mega-watts or smaller. While DG is not a new concept, DG is gaining widespread interest primarily for the following reasons: increase in customer demand, advancements in technology, economics, deregulation, environmental and national security concerns. The distribution power system traditionally has been designed for radial power flow, but with the introduction of DG, the power flow becomes bidirectional. As a result, conventional power analysis tools and techniques are not able to properly assess the impact of DG on the electrical system. The presence of DG on the distribution system creates an array of potential problems related to safety, stability, reliability and security of the electrical system. Distributed generation on a power system affects the voltages, power flow, short circuit currents, losses and other power system analysis results. Whether the impact of the DG is positive or negative on the system will depend primarily on the location and size of the DG. The objective of this research is to develop indices and an effective technique to evaluate the impact of distributed generation on a distribution power system and to employ the particle swarm optimization technique to determine the optimal placement and size of the DG unit with an emphasis on improving system reliability while minimizing the following system parameters: power losses, voltage deviation and fault current contributions. This research utilizes the following programs to help solve the optimal DG placement problem: Distribution System Simulator (DSS) and MATLAB. The developed indices and PSO technique successfully solved the optimal DG sizing and placement problem for the I 13-Node, 34-Node and 123-Node Test Cases. The multi-objective index proved to be computational efficient and accurately evaluated the impact of distributed generation on the power system. The results provided valuable information about the system response to single and multiple DG units.