This paper proposes an analytical expression to calculate the optimal size and an effective methodology to identify the corresponding optimum location for DG placement for minimizing the total power losses in primary distribution systems. The analytical expression and the methodology are based on the exact loss formula. The effect of size and location of DG with respect to loss in the network is also examined in detail. The proposed methodology was tested and validated in three distribution test systems with varying size and complexity. Results obtained from the proposed methodology are compared with that of the exhaustive load flows and loss sensitivity method. Results show that the loss sensitivity factor based approach may not lead to the best placement for loss reduction.