It is evident that Voltage instability and increased power loss on distribution systems are major challenges due to ever increasing load growth. To overcome these problems several techniques have been used. Gondar city distribution network, having ten 15kV feeders, is well known by its long radial structure (up to 36kM), supplying large number of loads in a single feeder. Following this most of the networks are characterized by operating near to the instability limit, poor voltage profile (below 0.95 p.u) and increased power loss. In this thesis work Performance analysis of distribution Static synchronous compensator (DSTATCOM) for power system voltage profile enhancement and improvement of power transfer capability for Gondar city distribution network (on sample of Fasil feeder) have done. The optimal allocation and sizing of shunt-connected power electronic device(DSTATCOM) used in this thesis used to improve power transfer capability by enhancing the voltage profile and minimizing the power loss of the system .This work compares voltage profile and line losses (reactive power, active power) without any compensating device and then with compensating device (D-STATCOM). The optimal location and size of the compensation devices have done by forward/backward sweep load flow analysis and GA optimization technique is applied. Following this, simulation results shows that the active power loss is reduced from 274.4kW to 175.4kW and the reactive power loss is reduced from 178.02kVAr to 126.2kVAr. The reduction of the active and reactive power losses are 29.103% and 29.11% respectively and the minimum voltage becomes 0.9509p.u which confirms lower IEEE voltage limit. This in turn indicates that the implementation of shunt compensation method (D-STATCOM) is advisable for electrical distribution system. Keywords-D-STATCOM, Optimum location and size, Radial distribution system