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Optimal reactive power dispatch (ORPD) problem has a significant influence on optimal operation of power systems. However, getting optimal solution of ORPD problem is a strenuous task for the researchers. The inclusion of flexible AC transmission system (FACTS) devices in the power system network for solving ORPD problem adds to its complexity. This paper presents the application of chemical reaction optimization (CRO) for optimal allocation of a static synchronous compensator (STATCOM) to minimize the transmission loss, improve the voltage profile and voltage stability in a power system. The proposed approach is carried out on IEEE 30-bus and IEEE 57-bus test systems and the simulation results are presented to validate the effectiveness of the proposed method. The results show that the proposed approach can converge to the optimum solution and obtains better solutions as compared to other methods reported in the literature. Ó 2015 Production and hosting by Elsevier B.V. on behalf of Ain Shams University. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).