This paper proposes a novel approach for determining optimal location and effective size of distributed generation units (DGUs) in the distribution systems. The goal of this study is to minimize both the total power loss on all distribution branches and the total cost of DGUs including investment cost, operation cost and maintenance cost. The major constraints of the systems regarding harmonic distortions, branch current and voltage must be kept within allowed operating limits. The proposed improved equilibrium optimizer (IEO) is developed from the original equilibrium optimizer (EO), which was motivated by control volume mass balance models. This novel algorithm can effectively expand the search area and avoid the premature convergence to low quality solution spaces. With the determined solutions from IEO, the total power loss is significantly reduced from 0.2110 MW to 0.0815 MW, 0.2245 MW to 0.0720 MW and 0.3161 MW to 0.1510 MW for IEEE 33-bus, IEEE 69-bus and IEEE 85-bus radial distribution systems, respectively. Not only that, the total cost of DGUs is also more economical and consumes only $7.0231 million, $6.6357 million and $6.2721 million corresponding to the three systems for a 20-year planning period. The performance of the proposed algorithm is compared to three other implemented methods consisting of artificial bee colony (ABC) algorithm, Salp swarm algorithm (SSA) and EO, and eight previously published methods for the three test systems. The comparisons of results imply that IEO is better than other methods in terms of performance, stability and convergence characteristic.