A new approach for the systemized optimization of power distribution systems is presented in this paper. Distribution system reliability is modelled in the optimization objective function via outage costs and costs of switching devices, along with the nonlinear costs of investment, maintenance and energy losses of both the substations and the feeders. The optimization model established is multi-stage, mixed-integer and nonlinear, which is solved by a network-flow programming algorithm. A multi-stage interlacing strategy and a nonlinearity iteration method are also designed. Supported by an extensive database, the planning software tool has been applied to optimize the power distribution system of a developing city.