Using isolated and polarized states of fragments, a method for computing the polarization energies in density functional theory (DFT) and density‐functional tight‐binding (DFTB) is developed in the framework of the fragment molecular orbital method. For DFTB, the method is extended into the use of periodic boundary conditions (PBC), for which a new component, a periodic self‐polarization energy, is derived. The couplings of the polarization to other components in the pair interaction energy analysis (PIEDA) are derived for DFT and DFTB, and compared to Hartree–Fock and second‐order Møller‐Plesset perturbation theory (MP2). The effect of the self‐consistent (DFT) and perturbative (MP2) treatment of the electron correlation on the polarization is discussed. The difference in the polarization in the bulk (PBC) and micro (cluster) solvation is elucidated.