This paper proposes an optimal load shedding algorithm by which the system loss can be minimized when the load shedding is unavoidable in case of severe contingency such as the outage of key generators or lines. Shedding load .DELTA.S = .DELTA.P + J.DELTA.Q(MVA) is performed on the weakest bus (on the view of voltage stability), step by step, by the priority of the I.DELTA. = SQRT(.lambda.$\_$P/$^$2/ + .lambda.$\_$Q/$^$2/) index given for each load bus, where .lambda.$\_$P/ and .lambda.$\_$Q/ are the sensitivity indices representing the system loss variation versus active and reactive power change of the bus load bus. All loads are assumed to be constant power loads for convenience. A 5 bus sample system proves the effectiveness of the algorithm proposed.