We report ground-state potential energy curves for Mg2 and Ca2 calculated in a large Slater-type basis using the interacting correlated fragments (ICF) model of Liu and McLean. Within the framework of the model, we study convergence of the potential curves with respect to the amount of intrafragment electron correlation introduced into each of the interacting atoms. The ICF model requires localized orbitals and the convergence rate can be affected dramatically by the localization choice; we illustrate and discuss this effect. Successful application of the ICF model requires careful treatment of the basis set superposition error and we discuss this. Our best calculations with four electrons correlated in Mg2 give De=458.8 cm-1 compared with an estimated lower limit for the four correlated electron calculation of 464 cm-1 and an experimental value of 429.6 cm-1. The bulk of the difference between calculation and experiment is attributed to intrafragment core-valence correlation effects which decrease the dissociation energy by nearly 30 cm-1. In parallel calculations on Ca2, our computed four correlated electron De is 1236 cm-1 compared to the experimental 1095.4 cm-1, showing that core-valence electron correlations are responsible for decreasing the dissociation energy by approximately 149 cm-1. © 1992 American Institute of Physics.