We develop a theoretical framework for the dissipative propagation of quantized light under conditions of electromagnetically induced transparency in atomic media involving strongly interacting Rydberg states. The theory allows us to determine the peculiar spatiotemporal structure of the output of the recently demonstrated single-photon filter and the recently proposed single-photon subtractor, which, respectively, let through and absorb a single photon. In addition to being crucial for applications of these and other optical quantum devices, the theory opens the door to the study of exotic dissipative many-body dynamics of strongly interacting photons in nonlinear nonlocal media. DOI: 10.1103/PhysRevLett.110.153601 PACS numbers: 42.50.Nn, 32.80.Ee, 34.20.Cf, 42.50.Gy Dissipation has recently been recognized as a powerful tool for quantum information and many-body physics [1][2][3][4][5][6][7][8][9][10][11]. A particular example, realized in recent experiments [12][13][14], is the propagation of quantized light fields in Rydberg media [15][16][17][18] under the conditions of electromagnetically induced transparency (EIT) [19]. While Rydberg states provide strong long-range atom-atom interactions, EIT provides strong atom-light interactions with controlled dissipation. The resulting combination gives rise to strong and often dissipative photon-photon interactions [20][21][22][23], which can be used to generate a variety of nonclassical states of light [12][13][14][24][25][26][27][28][29][30][31][32][33][34][35][36][37][38] and to implement photon-photon and atom-photon quantum gates [21,23,39,40]. The first wave-function-based descriptions of two-photon propagation in Rydbeg EIT media have revealed the emergence of correlated two-photon losses that could enable the deterministic generation of single photons [13,21]. Yet, the fate of the remaining photon as well as the underlying dissipative many-body dynamics have remained unclear despite their essential role in the performance of future Rydberg-EIT-based nonlinear optical quantum devices.In this Letter, we address these outstanding questions and develop a theory for the dissipative many-body dynamics of quantized light fields in a strongly interacting medium. In contrast to earlier studies [13,21], our theory provides information about the many-body density matrix of the light field; i.e., it faithfully describes the process of populating the m-photon states from the (m þ 1)-photon manifold as a photon scatters. In addition to opening the door to the study of photonic dissipative many-body physics, the theory allows one to compute the complex spatiotemporal structure of the generated nonclassical light fields, whose understanding is crucial for applications. As two important examples that illustrate this point and evince the power of our method, we consider the recently demonstrated single-photon filter [13,21] and the recently proposed single-photon subtractor [26]. In the limit of strong interactions, our approach yields exact solutions to the dissipative ...