Abstarct: Increasing trend in using distributed generation has motivated power sector planners to consider approaches that result in befefiting the most from investments in this field. Meanwhile subjects such as power loss reduction as an important part of operation costs and improvement in voltage profile and voltage sag mitigation as two important factors in power quality, has significant role is lessoning imposed expeditures to utility companies and customers. Loss reduction is important for utility companies as it directly increases company benefit in competitive electricity markets, besides reaching power quality standards is too important as it has vital effect on customer orientation. In this paper an optimization algorithm is developed to gain these goals all together. In order to avaluate sag mitigation capability of proposed algorithm, voltage in voltage sensitive buses is investigated. An existing 20KV network has been chosen as test network and DG penetration level is 30% of the load of this grid. Results show the efficiency of proposed algorithm in reducung power loss, improving voltage profile and mitigating voltage sags in voltage sensitive buses. For evaluation of goal function which defines sag mitigation capability of proposed algorithm, voltage in five buses with highest annual fault rate is short circuited and voltage magnitude in voltage sensitive buses is investigated. More reduction in power loss, voltage profile improvement in all buses and voltage support and mitigation of voltage sag propagation to voltage sensitive buses are essential citeria for evaluation of proposed algorithm.