In this paper, effects of dividing the air-gap in the iron-core of shunt reactors into several discrete gaps on inductance parameters of the equivalent circuit, core losses and gap losses are investigated. This is achieved by both analytical calculations and Finite Element Method based analyses. A new method called Moving Strip Method is also introduced to estimate the gap loss in the iron-core of shunt reactors having discretely distributed small air-gaps relative to those with large air-gaps. Theoretical results are verified by experiments carried out on an optimized shunt reactor. Results obtained in this work show that leakage inductance component in the equivalent circuit of the reactor can be brought to an absolute minimum and gap loss owing to fringing flux can be reduced significantly by distributing a large air-gap in the reactor core into several discretely distributed small air-gaps. These will simplify the design procedure of shunt reactors which will be used in utility grid applications. Copyright (c) 2012 Praise Worthy Prize S.r.l. - All rights reserved.