The distribution area equivalent load dynamic model is an important foundation for accurate sensing and precise control in distribution network. Based on feeder voltage regulating equipment and distribution phasor measurement unit, the load dynamic model of distribution area can be identified online. This paper discusses this identification work deeply, and reveals its closed-loop identification essence from the mechanism. The transfer function of direct closed-loop identification is derived and the main factors affecting identification precision are introduced accordingly. Aiming at the poor accuracy of direct closed-loop identification, a two-stage closed-loop identification combined with augmented least square method is used. In this method, the closed-loop identification is transformed into two open-loop identifications and the noise model is identified synchronously to reduce the identification error. Based on simulation, the influence of the capacity, electrical distance and load structure on the identification error are analyzed. The simulation also verifies the effectiveness of two-stage closed-loop identification to reduce the identification error.