Abstract: Rational configuration of distribution network capacity is a critical measure to ensure reliable and environmentally friendly system operation. To this end, this paper proposes a multi-objective capacity optimization method for smart distribution networks in new-type power systems. The proposed method fully considers output uncertainties of distributed energy sources and designs a multi-objective optimization function using system operation costs, renewable energy utilization rates, and operational reliability as evaluation indicators. The study comprehensively addresses interaction power between distribution networks and external grids, interruptible load quantities, and system capacity deficits through linearized constraint representation. An improved sparrow optimization algorithm is introduced to solve the objective function, yielding optimal capacity configuration solutions. Test results demonstrate that applying this design methodology achieves over 70% renewable energy utilization rates, reduces environmental pollution, and enables environmentally friendly operations.