This paper is dedicated to solving the distributed optimization of generation dispatch of multi-area AC systems interconnected by DC lines, which aims at minimizing the total generation cost while satisfying the power supply demand balance and generation capacity constraints. A novel nodal loss formula which derived from the branch active power flow equation is proposed based on phase angle and impedance to improve the system economy. A distributed algorithm based on consensus is built to solve the generation dispatch problem. It has a great effect on improving convergence effect and rate of the system. The control strategy is used on the structure of multi-area interconnection, which improves the reliability of power supply and guarantee the power quality. The study was conducted using three area AC systems interconnected by DC lines. The simulation results show that the proposed generation dispatch method is reliable in convergence. It provides an effective tool for distributed optimization of generation dispatch of multi-area AC systems interconnected by DC lines.