In order to model both the full many-body polarization and dispersion interactions in atomic and molecular systems, a system of quantized Drude oscillators is introduced. The quantization is carried out using imaginary-time path integration, leading to an O(N) simulation method. As a test case, the model is parameterized for xenon.. and is shown to give quantitative agreement with experiment over a broad range of thermodynamic state points. (c) 2006 Elsevier B.V. All rights reserved.