A polarizable potential function for the hydration of alkali and halide ions is developed on the basis of the recent SWM4-DP water model [Lamoureux, G.; MacKerell, A. D., Jr.; Roux, B. J. Chem. Phys. 2003, 119, 5185]. Induced polarization is incorporated using classical Drude oscillators that are treated as auxiliary dynamical degrees of freedom. The ions are represented as polarizable Lennard-Jones centers, whose parameters are optimized to reproduce the binding energies of gas-phase monohydrates and the hydration free energies in the bulk liquid. Systematic exploration of the parameters shows that the monohydrate binding energies can be consistent with a unique hydration free energy scale if the computed hydration free energies incorporate the contribution from the air/water interfacial electrostatic potential (-540 mV for SWM4-DP). The final model, which can satisfyingly reproduce both gas and bulk-phase properties, corresponds to an absolute scale in which the intrinsic hydration free energy of the proton is -247 kcal/mol.