Distribution system provides a final link between the high voltage transmission system and the consumers. Most Ethiopian electric power system has fed by a radial distribution system. Gondar is one of the cities supplied by a radial distribution network. The case study in this thesis is applied in Gondar power distribution lines specifically at Gondar feeder. The feeder line has 60 nodes with a total capacity of 3.413 MW. The voltage profiles of most of the buses in feeder line are not in the acceptable voltage level (i.e. 0.95-1.05 p.u interval). The minimum bus voltage is 0.8515p.u while, the active and reactive power losses of the feeder are 377.75kW and 222.51 Kvar respectively. Therefore, to improve the overall efficiency, voltage profile improvement and power loss reduction is needed to this problem. This can be mitigated by placing voltage regulators and capacitors at proper locations in Radial Distribution Systems (RDS). Voltages and power loss indices of distribution system nodes are modeled by fuzzy membership functions. A fuzzy expert system (FES) containing a set of heuristic rules are used to determine the voltage regulator and capacitor placement suitability index. The aim of the study is to improve the efficiency of distribution system by maintaining the voltage limit within the acceptable ranges and reducing the total losses less than 7% standard limit significantly to provide good quality of power at the customer premises. The necessary data are collected and the load flow analysis of the system is simulated by NEPLAN software before and after compensation. The overall system results are simulated in MATLAB software. The effectiveness and the results obtained from both voltage regulator and capacitor placement optimality on the proposed method is presented and compared. As a result the total active and reactive power loss is reduced to 217.9KW and 143.66Kvar respectively and in the same way all the weak bus voltage profiles have also optimized to 0.9639p.u with standard ±5% voltage deviation level.