The Ethiopian Electric Power (EEP) is, undertaking a huge electric power generation, transmission and distribution expansion and it also started exporting electric power to neighboring East African Power Pool (EAPP) member countries since 2011 G.C. With the increase in power demand, operation and planning of large interconnected power system are becoming more and more complex, so power system would become less stable. Voltage instability is one of the phenomena which have resulted in a major blackout in Ethiopian power system grid. To maintain stability of such systems, it is desirable to plan suitable measures to improve power system stability and increase voltage stability margins. FACTS devices and HVDC transmissions have emerged as solutions to help power systems to increase the stability margins. Integration of Voltage Source Converter based HVDC and STATCOM can regulate the voltage-magnitude control as well as adaptive to active and reactive power control simultaneously because of their flexibility and fast control characteristics. This thesis investigated the voltage stability improvements that can be attained through integrating VSC-HVDC and STATCOM transmission system. North West Region (NWR) interconnected to Sudan through tie-line as well as VSC-HVDC and STATCOM device transmission model with a complete control system have been modelled and simulated on Power System Simulator for Engineers (PSS/E) software version 34.2. Then the performance of both improvement methods are evaluated and found to function satisfactorily at supporting bidirectional power flow from Ethiopia to Sudan or vice versa and at maintaining stability during disturbances. The fault on Sudan affected the system stability of Ethiopia when they are interconnected through AC transmission line but it can’t affect when it is connected by VSC-HVDC. As a general conclusion it was shown that integrating STATCOM and VSC-HVDC transmissions with an appropriate control strategy was an effective means to improve the system stability of interconnected areas where VSC-HVDC performed as firewall for fault on opposite area bus not to affect other area.