An improved nondominated sorting genetic algorithm-II (INSGA-II) has been proposed for optimal planning of multiple distributed generation (DG) units in this paper. First, multiobjective functions that take minimum line loss, minimum voltage deviation, and maximal voltage stability margin into consideration have been formed. Then, using the proposed INSGA-II algorithm to solve the multiobjective planning problem has been described in detail. The improved sorting strategy and the novel truncation strategy based on hierarchical agglomerative clustering are utilized to keep the diversity of population. In order to strengthen the global optimal searching capability, the mutation and recombination strategies in differential evolution are introduced to replace the original one. In addition, a tradeoff method based on fuzzy set theory is used to obtain the best compromise solution from the Pareto-optimal set. Finally, several experiments have been made on the IEEE 33-bus test case and multiple actual test cases with the consideration of multiple DG units. The feasibility and effectiveness of the proposed algorithm for optimal placement and sizing of DG in distribution systems have been proved.