This paper presents a new Particle Swarm Optimization based corrective strategy to alleviate overloads of transmission lines. A Direct Acyclic Graph (DAG) technique for selection of participating generators and buses with respect to a contingency is presented. Particle Swarm Optimization (PSO) technique has been employed for generator rescheduling and/or load shedding problem locally, to restore the system from abnormal to normal operating state. The effectiveness of the proposed approach is demonstrated for different contingency cases in IEEE 57 and modified IEEE 118 bus systems. The result shows that the proposed approach is computationally fast, reliable and efficient, in restoring the system to normal state after a contingency with minimal control actions. ©2009 IEEE.