A loop-flow-based method for capacitor optimization in distribution systems is proposed in this paper. An optimization algorithm that combines both economic and secure objectives together in a single function for optimal capacitor sizing is presented. Line-current flow, which is a direct indicator of power loss and line loading, is taken as the controlled variable in this optimization algorithm. Therefore, the algorithm has a simple formulation, and is particularly suitable for use in the analysis of radial and weakly meshed distribution systems. An efficient strategy is designed to search for the optimal solution. Because the objective function for the optimization is clearly a quadratic of line-current flow, the convergence character of this algorithm is close to linear and a small iteration is needed in the optimization process. Digital tests have been done to show the validity and efficiency of this algorithm.