With the increasing deployment of distributed generators in the distribution system, a very large search space is required when dynamic programming (DP) is applied for the optimized dispatch schedules of voltage and reactive power controllers such as on-load tap changers, distributed generators, and shunt capacitors. This study proposes a new optimal voltage and reactive power scheduling method based on dynamic programming with a heuristic searching space reduction approach to reduce the computational burden. This algorithm is designed to determine optimum dispatch schedules based on power system day-ahead scheduling, with new control objectives that consider the reduction of active power losses and maintain the receiving power factor. In this work, to reduce the computational burden, an advanced voltage sensitivity index (AVSI) is adopted to reduce the number of load-flow calculations by estimating bus voltages. Moreover, the accumulated switching operation number up to the current stage is applied prior to the load-flow calculation module. The computational burden can be greatly reduced by using dynamic programming. Case studies were conducted using the IEEE 30-bus test systems and the simulation results indicate that the proposed method is more effective in terms of saving electric charges and improving the voltage profile than loss minimization.