We present a new self-consistent field approach which, given a large ''secondary'' basis set of atomic orbitals, variationally optimizes molecular orbitals in terms of a small ''primary'' basis set of distorted atomic orbitals, which are simultaneously optimized. If the primary basis is taken as a minimal basis, the resulting functions are termed polarized atomic orbitals (PAO's) because they are valence (or core) atomic orbitals which have distorted or polarized in an optimal way for their molecular environment. The PAO's derive their flexibility from the fact that they are formed from atom-centered linear-combinations of the larger st of secondary atomic orbitals. The variational conditions satisfied by PAO's are defined, and an iterative method for performing a PAO-SCF calculation is introduced. We compare the :PAO-SCF approach against full SCF calculations for the energies, dipoles, and molecular geometries of various molecules. The PAO's are potentially useful for studying large systems that are currently intractable with larger than minimal basis sets, as well as offering potential interpretative benefits relative to calculations in extended basis sets. (C) 1997 American Institute of Physics.