This paper deals with an optimal tuning of the Proportional-Integral-Derivation (PID) controller for both Load Frequency Control (LFC) and Automatic Voltage Regulator (AVR) of two-area interconnected power system using Particle Swarm Optimization (PSO) algorithm. The active and reactive powers are controlled separately. The LFC loop controls the frequency and active power and the AVR loop adjusts the voltage and reactive power. In order to analyze the system frequency, the tie line power flow, and the system voltage, the two-area interconnected power system is simulated for a step load disturbance in Area-1. The main primary objective is to suppress all the fluctuations of the system due to the disturbance and get back the frequency and voltage at nominal values. The results are compared with the ones obtained by the traditional Ziegler-Nichols (Z-N) method, Genetics Algorithm (GA) and Bacterial Foraging Optimization Algorithm (BFOA), and the proposed method has proven to be very efficient.