In this paper, Differential Evolution (DE) has been proposed for optimal sizing of capacitors to reduce the power loss and to improve the voltage profile in a radial electric distribution system. Power Loss Index is used for finding the potential buses in the electric distribution system and then the DE is used to determine the sizing of capacitors that are to be placed at the potential locations in order to reduce the power losses and to improve the voltage profile. The proposed approach has been implemented and tested on various standard test cases such as 10- bus and 85- bus systems. The simulation results obtained by the proposed approach have been compared with uncompensated system in terms of the power loss. Also the results have been compared with the existing methods available in literature. It has been found from the various test cases that the proposed approach provides best solution in terms of the power loss.