Renewable energy plays a significant role in the power generation revolution in line with the future smart grid focus. one of the most abundant, clean and green energy productions is the solar energy. Bahir Dar distribution network is a type of radial distribution system, not only a substantial amount of power is lost but also the voltage profile of distant nodes from the main supplying substation are frequently below the acceptable limit especially during heavy load conditions. This in turn exposes the end consumers to continuously suffer from under-voltage problem. The voltage profiles of most of the buses in feeder R5-02 are not in the acceptable voltage level (i.e., 0.95-1. 05p.u interval). Moreover, the total real power loss of the feeder is 182.75 KW. The solar system is connected with the grid system to improve voltage profile and reduce power loss. The PSO (particle swarm optimization) algorithm is used to determine the optimal size and location of the solar system in the R5-02 Feeder. The minimum voltage is increased from 0.9378p.u to 0.9601p.u and the total real power loss is reduced 76.8 KW after connecting 2MW PV at bus 20. But an inverter which introduces harmonics into the grid is required to connect a photovoltaic system to the grid. Voltage and current waveforms lose their sinusoidal shape due to harmonics. According to the FFT (Fast Fourier transform) analysis, the inverter in grid-connected photovoltaic system has THD (total harmonic distortion) of 29.94%, which is higher than the IEEE standard of 5%. In this thesis, Hybrid Power Filter (shunt passive and shunt active filter) is simulated using MATLAB SIMULINK. The simulation result indicates that the THD of the system is reduced from 29.94% to 8.82% after connecting Shunt Passive filter only at the PCC (point of common coupling). The THD of the system is reduced from 29.94% to 4.55% after connecting Shunt active filter only. The THD of the system is reduced from 29.94% to 2.39% after connecting Hybrid power filter which is less than IEEE-519 standard of 5%. Compared to passive and shunt active power filters, hybrid power filter performs better and also reduce the kVA rating of Shunt active filter. Keywords: PV system, Particle Swarm Optimization, Power Loss, Voltage Profile, Total Harmonic Distortion, Active power filter, Hybrid power filter