Distribution systems hold a very significant position in the power system since it is the main point of link between bulk power and consumers. Distribution systems are always suffering from some important problems such as voltage drops which relatively high, power loss and the voltage profile at the receiving ends is below the operating limit. In an electrical power system, if there is no sufficient reactive power, the voltage decreases. Thus, it is not possible to push the power demand to loads through the lines and has a strong effect on system stability. Many attempts have been made to improve these issues. This thesis proposes using SVC in Bahirdar distribution systems to reduce system loss and improve voltage profile. SVC is shunt FACTs devices that is used to improve the performance of distribution system. To maintain the rated voltage within acceptable limit at load end, low rated static VAR compensators (SVC) are installed at weak buses. Optimal Capacitor Placement (OCP) is used to determine weak buses in the system and rating of SVC in Electrical Transient Analyzer Program (ETAP). Modeling and Simulation of the distribution network with and without SVC had been developed in the Electrical Transient Analyzer Program (ETAP) environment. Power flow analysis of Bahirdar distribution network was performed to calculate the various values of voltage and power flow in the distribution system. Also, Load flow analysis of Bahirdar distribution network including static var compensator (SVC) in ETAP was performed to keep voltage profile within ±10% of the rated voltage. From the simulation result it was observed that the minimum and maximum bus voltages value were 83.966% (bus 135) and 98.278% (bus1) which were improved to 98.12% (bus135) and 99.507% (bus 1) after compensation, respectively. Hence, When SVC was connected to the most weak buses, the minimum and maximum bus voltage value were 90.581% (bus 97) and 99.607% (bus 81). The total voltage drop (or deviation) before and after SVC placement was obtained as 2.1168pu and 1.9434pu respectively. Hence, the total voltage profile improvement measured based on the reduction in total votage deviation (TVD) of bahir dar distribution network was obtained as 8.192%. Also, the total losses associated with the active and reactive power were 878.684KW and 1673.9077KVAr before the placement of SVC at the weakest. After SVC was connected to the weakest buses, the active and reactive power loss became 580.214KW and 1235.0798KVAr. Hence, the loss saving was obtained as 298.4701KW,i.e., 33.97% with the total SVC size of 11.8MVAr capacitive and 23.6MVAr inductive.