In this paper, optimal allocation of a distributed thyristor-controlled series compensator (DTCSC) in a power system is presented to minimize overload, voltage deviations, and power losses while improving system reliability. The decision variable was defined as the optimal reactance of the DTCSC in the power system, which was determined using a new meta-heuristic algorithm named the improved equilibrium optimization algorithm (IEOA). A nonlinear inertia weight reduction strategy was used to improve the performance of traditional EOA in preventing premature convergence and facilitate a quick global optimum solution. The effect of system critical line outage was evaluated for each of the considered goals. To evaluate the effectiveness of the proposed methodology, IEOA capability was compared with particle swarm optimization (PSO) and manta ray foraging optimizer (MRFO) methods. Simulations were carried out considering different scenarios on 14- and 118-bus test systems. The results showed that, for all scenarios, optimal allocation of DTCSC could result in a significant reduction in overloading, voltage deviation of network buses, as well as power losses under the condition of line outage, due to the optimal injection of reactive power. In all investigated scenarios, our results attested to the superiority of the IEOA over the traditional EOA, PSO, and MRFO in achieving a better value for the objective function. In addition, the results showed that improving reliability in the objective function could eliminate overloading, and hence, introduce further improvement in each of the objectives.