THIS PAPER DESCRIBES AN ADVANTAGEOUS METHOD FORUSING THE CAPACITOR BANKS IN THE DISTRIBUTION NETWORK, OPTIMALLY.THE AIM IS TO DETERMINE THE COUNT, LOCATION AND CAPACITOR VALUESIN ORDER TO MINIMIZE THE ANNUAL COST RESULTING FROM ENERGY LOSSESAND CAPACITOR BANK’S INSTALLATION COST. BESIDES, IN THE CASE OFHAVING NONLINEAR LOADS IN THE NETWORK, BY INSTALLING CAPACITORS INAPPROPRIATE LOCATIONS, THE POSSIBILITY OF OCCURRING A RESONANCE ATHARMONIC FREQUENCIES ORIGINATING FROM NONLINEAR LOADS, COULD BEREDUCED. THEREFORE, IN CAPACITOR PLACEMENT, POWER QUALITYCONSTRAINTS, INCLUDING THE MAXIMUM HARMONIC DEVIATION VALUE, ARE TAKEN INTO ACCOUNT. THE CASE STUDY IS A NONLINEAR PROBLEMTHAT A NEW ALGORITHM BASED ON THE GRAVITATIONAL OPTIMAL DETECTORAND FUZZY SYSTEM HAS BEEN USED TO SOLVE IT. IN COMPARISON WITHOTHER INTELLIGENT SEARCH METHODS, THE PROPOSED ALGORITHM HASAPPROPRIATE PRECISION AND CONVERGENCE RATE. THE PROPOSEDMETHOD HAS BEEN PERFORMED ON A 69-BUSS NETWORK AND A PART OFTHE DISTRIBUTION NETWORK OF CITY YAZD, AND THE RESULTS CONFIRMEDTHE PERFORMANCE AND EFFICIENCY OF THE PROPOSED ALGORITHM.