With the increasing pressures on energy conservation and emission reduction, the urgent need arises to increase the maximum penetration of distributed generation (DG) without violating the voltage limits. This paper proposes a two-dimensional multi-resolution model of smart distribution grid (SDG) to analyse dynamic changes of DG and load at first. And then based on the model, an analytical methodology is presented to determine and increase the maximum DG penetration without voltage violations by voltage regulation. IEEE Comprehensive Test Feeder is used to prove the feasibility and validity of the pro posed model and method. The simulation results show that voltage regulation is proved to be a good solution to increase the maximum penetration of DG, but a compromise must be made between higher penetrations of DG and fewer adjustments of voltage regulation devices. This will have major implications for the development of DG in SDG.