The stability phenomenon of a synchronous machine plays a major role in the interconnected power systems. The dynamic stability of multi machine system can be improved by providing the compensating damping torque to the synchronous generator. Design of power system stabilizer is necessary to enhance the stability of the synchronous generator. The effect of a power system stabilizer located at machine certainly influences the stability of other machines. In this proposed approach, the power system stabilizer is designed by using firefly algorithm for the improvement of stability of a three machine system. The designed stabilizer's performance is observed for different locations of the system and compared with the performance of stabilizer designed by using genetic algorithm. From the results, the power system stabilizer designed from firefly algorithm gives an improved stable performance than a genetic algorithm based power system stabilizer. The stable eigen values are analyzed by using pseudo spectrum analysis. The step responses of each state of the three machines shows that the proposed stabilizer gives enhanced stability of the total system.