The invention relates to an optimal reactive power compensation method for 110KV and 35KV power grids. The method includes: firstly, carrying out load flow calculation according to operating parameters of the power grids; obtaining power system network line loss by means of load flow calculation, and extracting reactive current of circuits; secondly, selecting a root power node to determine all subsequent nodes and branches of the root power node; thirdly, sequentially calculating reduced power system network line loss of all nodes in reactive power compensation and reactive power compensation amount required by the nodes, and selecting the node maximally saving the power system network line loss as a candidate compensation node; fourthly, repeating the steps until no root power node exists; finally, subjecting the candidate compensation node to reactive power compensation, carrying out load flow calculation, and adjusting the compensation amount according to load flow calculation results to obtain an optimal node compensation amount; after the optimal compensation is acquired, carrying out load flow calculation and outputting results. The optimal reactive power compensation method has the advantages that reactive power in the power grid systems is balanced to enable safety, stability and economy in operation of the power grids.