The paper describes the development , implementation and testing of an equivalent bus algorithm for multimachine power systems with arbitrary number of nodes. The algorithm is based on collecting all nodes and transmission lines which are connected to a certain machine node to represent only one equivalent node and one equivalent transmission line. Each machine is then connected to equivalent bus through one equivalent transmission line which can be entered in the machine equations. The algorithm reduces considerably the computation time in dynamic stability calculations and is most suitable for on line applications. The present algorithm has been applied to a 6-node power system model. Seven differential equations are needed for a reasonably accurate representation of the synchronous machines. A considerable reduction in computation time has been achieved in comparison with the other conventional techniques .