Abstract: This study presents an approach to find and choose the optimal location of Unified Power Flow Controller (UPFC) based on the sensitivity of the total system active power loss with respect to the control variables of the Unified Power Flow Controller (UPFC). The control system of the UPFC’s injection model is developed and its contributions to avoiding a voltage collapse are explored by analyzing a multi-machine test system. With the UPFC being embedded in the system using static approach, the analysis is concentrated on the sensitivities of the UPFC’s set of control parameters. The sensitivities concern minimization of total system power loss. Simulation studies are carried out in the MATLAB/Simulink environment and results show that optimal siting of the UPFC provide better damping during transient and dynamic control as well as enhance voltage stability.