The dipole interaction model for molecular optical properties is extended to include solvent effects by means of a cavity model in which the assembly of interacting polarizable particles that constitute a solute molecule is placed in a spherical cavity in a continuous dielectric. The solvent effects come about through the reaction fields of the polarized particles and the cavity field associated with an incident light wave. The latter is obtained for the case of a cavity radius that is small compared to the wavelength of the light using the Mie-Debye theory of light scattering by an embedded sphere. Expressions are obtained for the mean refractive index, molar rotation, molar absorption coefficient, and circular dichroism of a solution. The model includes effects of solvent on oscillator strengths, rotational strengths, absorption frequencies, and interchromophore coupling. The theory is used to calculate the molar rotation of CHFClBr and the absorption and circular dichroic spectra of cyclo(Ala-Ala) in cavities of various radii and solvents of various dielectric constants. The results are compared with predictions from older dielectric continuum models. © 1990 American Chemical Society.