We present the parametrization of a new polarizable model for water based on Thole＇s method [Chem. Phys. 59, 341 (1981)] for predicting molecular polarizabilities using smeared charges and dipoles. The potential is parametrized using first principles ab initio data for the water dimer. Initial benchmarks of the new model include the investigation of the properties of water clusters (n = 2 - 21) and (hexagonal) ice Ih using molecular dynamics simulations. The potential produces energies and nearest-neighbor (H-bonded) oxygen-oxygen distances that agree well with the ab initio results for the small water clusters. The properties of larger clusters with 9-21 water molecules using predicted structures from Wales et al. [Chem. Phys. Lett. 286, 65 (1998)] were also studied in order to identify trends and convergence of structural and electric properties with cluster size. The simulation of ice Ih produces a lattice energy of -65.19 kJ/mol (expt. 258.9 kJ/mol) with an average dipole moment of 2.849 D. The calculated spectrum for the phonon density of states exhibits features that may correspond to the experimentally measured peaks at 28 and 37 meV. The many body contribution to the total energy is found to be close to 31% for both the water clusters and for ice Ih.