Distributed Generation or localised generation of electrical power has been gained increasing popularity as a feasible element of electrical power systems. DG, as small scale generating source located near the load center, is usually integrated within the Distribution System (DS). Integration of DG has many benefits like reduction in transmission and distribution congestion, deferring investment on upgrades, meeting demand growth and improving distribution system performance by reducing power losses and enhancing voltage profile and security. To achieve most of the benefits from DG integration, the DG has to be placed and sized optimally. In this paper, implementation of a simple analytical algorithm based on distribution load flow studies for optimal sizing of distributed generators considering % DG penetration levels is presented. Later the impact of variation of DG on power loss is investigated and suggested the optimal DG levels for the maximum reduction of power losses in radial distribution systems. The algorithms are built in MATLAB platform.