Objectives of the present work are to establish a new voltage stability index in radial distribution structure by considering distributed generators (DG). For fulfilment of this, analysis and study works were carried on for various types of loads with and without considering DG. One indicator is utilized to identify the proper location of distributed generator. For ideal size of DG an algorithm is proposed considering some constraints. After testing and analysis of this technique on medium size distribution network, it is concluded that placement of proper size of DG at optimal location the system has improved in terms of voltage level, decrease of losses and stability of the system. Here, maximum utilization of the existing system can be achieved by satisfying the customer with minimum frequency of failure and minimum duration of outage within the existing resources.