Abstract The new exact formulation of the pseudopotential theory developed in several previous publications is used to formulate a comprehensive pseudopotential theory of molecules. It is assumed that the pseudopotential theory can be applied to molecules in which there are n valence electrons plus cores which are the same in the molecule as in the separated atoms. Using the exact pseudopotential formulation it is shown that the molecular model Hamiltonian of the n valence electrons can be built up from the model Hamiltonians of the valence electrons of the separated atoms. The model Hamiltonian is written in terms of simple model potentials. For the determination of the model potentials simple rules are derived. It is shown that the model potentials, in which the many-valence-electron effects are fully taken into account can be determined using the Hartree-Fock data for the separated neutral atoms. It is shown that the molecular model Hamiltonian is removed from the exact one by two approximations which are shown to be accurate if the model potentials are properly chosen. The computational procedures are elucidated by discussing the examples of the molecules Cl 2 , Hg 2 and HgH.