Differential evolution based optimal reactive power dispatch for real power loss minimization in power system is presented in this paper. The proposed methodology determines control variable settings such as generator terminal voltages, tap positions and the number of shunts to be switched, for real power loss minimization in the transmission system. The problem is formulated as a mixed integer nonlinear optimization problem. A generic penalty function method, which does not require any penalty coefficient, is employed for constraint handling. The formulation also checks for the feasibility of the optimal control variable setting from a voltage security point of view by using a voltage collapse proximity indicator. The algorithm is tested on standard IEEE 14, IEEE 30, and IEEE 118-Bus test systems. To show the effectiveness of proposed method the results are compared with Particle Swarm Optimization and a conventional optimization technique - Sequential Quadratic Programming. © 2007 Elsevier B.V. All rights reserved.