Distribution centers in a distribution system that consists of the distribution centers and retailers supplies products to retailers. At the present, although total capacity of the distribution centers are enough to supply total demand of retailers, capacity of the distribution centers need to be expanded to satisfy the demand of retailers in case that future demand of the retailers will be increased. Capacity expansion model in a distribution system is to determine the location and size of expansion distribution centers that minimize costs among given distribution centers. Transportation amount from distribution center to retailers also is determined. The costs factors are the capacity expansion costs of the distribution centers and the transportation costs from the distribution centers to the retailers. A model is formulated, and a genetic algorithm based solution procedure is developed. A numerical example is shown and the algorithm is analyzed through examples.