The occupied and unoccupied valence-band structure of Y1Ba2Cu3O7 is probed with photoemission, inverse photoemission, and near-edge x-ray absorption. The Cu 3d and O 2p states nearly coincide, thereby maximizing their interaction. The occupied states are shifted down by 2 eV relative to ground-state band calculations, indicating localization and a Coulomb interaction U>2 eV. The bandwidth is 10 eV with the top of the band at EF+2.5 eV. Cu is found in the 2+ oxidation state. O has 2p holes which are assigned to specific oxygen atoms. © 1987 The American Physical Society.