In this paper, we consider a distributed multiple-input–multiple-output (D-MIMO) system, where the channel is flat fading and may be correlated, and experiences both small- and large-scale fading. We assume that full knowledge of channel state information (CSI) is available at the receiver and that only the first-and second-order statistics of the channel are available at the transmitter. For such a system with square quadrature amplitude modulation (QAM), an asymptotic symbol error probability (SEP) is derived for the linear zero-forcing (ZF) receiver. Then, we propose an optimal diagonal power loading (PL) strategy that minimizes the dominant term of the asymptotic SEP subject to either a total transmission power constraint when the total power normalization coefficient can be fed back to the transmitter from the receiver or an individual transmission power constraint. A simple closed-form solution is obtained. Computer simulations show that our presented optimal system attains significant performance gains over the currently available equal PL system.