An interaction energy decomposition analysis method based on the block-localized wavefunction (BLW-ED) approach is described. The first main feature of the BLW-ED method is that it combines concepts of valence bond and molecular orbital theories such that the intermediate and physically intuitive electron-localized states are variationally optimized by self-consistent field calculations. Furthermore, the block-localization scheme can be used both in wave function theory and in density functional theory, providing a useful tool to gain insights on intermolecular interactions that would otherwise be difficult to obtain using the delocalized Kohn–Sham DFT. These features allow broad applications of the BLW method to energy decomposition (BLW-ED) analysis for intermolecular interactions. In this perspective, we outline theoretical aspects of the BLW-ED method, and illustrate its applications in hydrogen-bonding and π–cation intermolecular interactions as well as metal–carbonyl complexes. Future prospects on the development of a multistate density functional theory (MSDFT) are presented, making use of block-localized electronic states as the basis configurations.