The plug-in hybrid electric vehicle (PHEV) with vehicle-to-grid (V2G) capability is becoming increasingly popular and can be expected to deploy in a large scale. According to the estimation of PHEV penetration degree and the charging characteristics, the modeling of distribution grid with extra load of PHEV charging is formulated first. The PHEVs plugged into the grid, when aggregated in a considerable number, constitute a new load. The impacts of this extra load on the grid are analyzed by power flow simulation in terms of power losses and voltage variation. Uncontrolled charging and optimal charging scenarios are compared in the 33-bus test system. The results indicate the possible problem caused by charging PHEVs and the necessity of building a new control scheme to schedule the generation and the charging profile in the grid. Thus the optimization algorithm is designed to minimize the power losses, and enhance the power quality of the grid as well. The improved model with further constraints for practical application of V2G is discussed. In this model, the ability to schedule both charging and discharging of PHEVs with V2G technology is presented.