A fuzzy reasoning based decision maker is developed in this study in order to determine the optimal capacitor location and sizing in radial distribution systems for the purpose of minimizing the power loss and capacitor cost with voltage limit constraints. The solution methodology includes two main parts. The first part is a fuzzy expert system that selects suitable candidate buses for capacitor locations in distribution feeder and the second part is a fuzzy optimization system that estimates the optimal capacitor sizing to obtain maximum savings at the optimal buses determined. Power flow analysis of the radial distribution system is performed using forward and backward sweep algorithm. The proposed method in this paper is simulated in MATLAB environment and verified on standard IEEE 9 bus radial distribution system. Results show that the proposed method ensures less annual cost and power loss compared to other methods in literature.