The application of renewable energy in electric power system is growing rapidly due to enhanced public concerns for adverse environmental impacts and escalation in energy costs associated with the use of conventional energy sources, distribution generation (DG) is recognized as an encouraging and cost effective generation source both in large grid connected systems and small isolated applications. Power output from distribution generation is not readily controllable. High distribution generation penetration can lead to high-risk levels in power system reliability and stability. In order to maintain the system reliability and stability, this paper presents a probabilistic evaluation method that can incorporate the impacts on reliability of new energy utilization in electric power systems. Two procedures designated as equivalent simplifying method and the islanded reliability calculating method are proposed and discussed. In the equivalent simplifying method, the equivalent failure rate and failure during time for a given system at a specified reliability level is determined using system equivalent simplifying. In the islanded probability calculating method, the islanded probability at a load point for a given system containing distribution generation is calculated. The analysis results of example show that the probabilistic evaluation method is feasible for the operator to decide the appreciate capability and detailed location of possible distribution generation in electric power systems, and consequently a desired level of reliability is obtained.