We present a theoretical method that combines density functional theory (DFT) and full configuration interaction (CI). Such a combination is based on the impurity model to (i) incorporate the advantages of DFT in description of the dynamic correlation and (ii) reduce the number of the two‐electron integrals. The impurity model has been introduced with the help of a special type of the hybrid functional, namely, the exact exchange for correlated electrons (EECE), and the orthogonal fragment orbitals formalism. The EECE functional, originally based on the formulation of the local density approximation + U (LDA + U) method without the empirical parameter U, has been rewritten in this work in a form that incorporates the projected electron–electron repulsion energy operator. This representation has been compared with other types of nonglobal hybrids: position dependent and range separated hybrids. Further, the obtained Hamiltonian of the generalized Anderson model has been transformed to the form that affords the implementation of the linear scaling density‐matrix renormalization group algorithm. © 2011 Wiley Periodicals, Inc.