We develop an integral equation theory that applies to strongly associating orientation-dependent liquids, such as water. In an earlier treatment, we developed a Wertheim integral equation theory (IET) that we tested against NPT Monte Carlo simulations of the two-dimensional Mercedes Benz model of water. The main approximation in the earlier calculation was an orientational averaging in the multidensity Ornstein-Zernike equation. Here we improve the theory by explicit introduction of an orientation dependence in the IET, based upon expanding the two-particle angular correlation function in orthogonal basis functions. We find that the new orientation-dependent IET (ODIET) yields a considerable improvement of the predicted structure of water, when compared to the Monte Carlo simulations. In particular, ODIET predicts more long-range order than the original IET, with hexagonal symmetry, as expected for the hydrogen bonded ice in this model. The new theoretical approximation still errs in some subtle properties; for example, it does not predict liquid water's density maximum with temperature or the negative thermal expansion coefficient. (C) 2003 American Institute of Physics.