To improve the reliability of distribution system is an important goal of the construction of distribution automation system, but it needs to consider the economic costs of distribution automation equipment. And the funds are usually appropriated by stage. A method to optimize the placement of distribution automation terminal units with dynamic planning is proposed in this paper. Multiple types of distribution terminals are used. Fault indicators, voltage-time type terminal units and voltage-current type terminal units are placed on overhead feeders, and fault indicators, two-remote terminal units and three-remote terminal units are placed on cable feeders. According to the type of automation terminal, the failure-impacted mode can be determined. Via Java programming language, distribution data is read from the XML file. Regional node is separated by switches. Network topology information is stored with graphics library JGraph. Considering the outage caused by fault, the reliability of power supply is evaluated by the outage time of per users. Dynamic planning models to optimize reliability index and total investment are established. The case of distribution terminal units placement planning is about feeders of distribution network in a certain area, and the results verify the method's feasibility and superiority which can be used as a reference in a similar project. This work is supported by National Natural Science Foundation of China (No. 51437006).