The accuracy of the systematic fragment approach to the estimation of molecular electronic energies is enhanced by a significantly improved treatment of nonbonded interactions between molecular fragments. Distributed electrostatic interactions, pairwise dispersion interactions, and many-body induction are evaluated from ab initio calculations of small molecular fragments. The accuracy of the complete approach is reported for a large sample of typical neutral organic molecules. (C) 2009 American Institute of Physics. [doi:10.1063/1.3222639]