We employ density functional methods to derive an integral equation for the two-point intermolecular correlation function in molecular liquids. This radial distribution function is expressed as a two molecule average over a Boltzmann factor involving a ''bare'' site-site interaction, plus a pairwise additive, intermolecular, medium induced potential which mimics the remaining molecules in the system. This theory is formally exact in the low density limit. While the theory is valid in general for large molecule and polymer liquids, we demonstrate its use here for the case of the simple diatomic liquid. In this application, good agreement is found at all densities for the radial distribution function and equation-of-state when compared with computer simulations. Furthermore, the theory appears to give pressures that are more thermodynamically consistent than those obtained with reference interaction site model (RISM) theory.