The invention discloses a distribution network loss reduction method for reducing reactive flowing. The method comprises: a distribution network on which loss reduction is going to be carried out is determined; power factors of all loads in the distribution network are calculated; whether any load with the power factor not meeting the specification exists is determined; if so, rectification is carried out until all loads are qualified; all main transformer reactive losses and main transformer high-voltage-side power factors in the distribution network are calculated; according to the calculated all main transformer reactive losses and main transformer high-voltage-side power factors in the distribution network, reaction compensation is added at a low voltage side of a heavily damaged maintransformer to cancel reactive losses of the main transformer; all line reaction losses and line inlet side power factors in the distribution network are calculated; and on the basis of the calculatedall line reaction losses and line inlet side power factors in the distribution network, reaction compensation is added at an outlet-side transformer station of a heavily damaged line to cancel reactive losses of the line. According to the invention, the losses of the distribution network are reduced effectively; reactive power distribution is improved; and the voltage quality is enhanced.