The effects of interchain interactions on the exciton-binding energy of conjugated polymers are explored theoretically, using rigid polyacetylene chains as a model system. An explicit quantum chemical description is used to describe the polarization that an electron and hole induce in the surrounding polymer chains. The motivation for explicitly including interchain interactions is to allow the standard parameters of semiempirical quantum chemistry to be used to make predictions for solid-state polymers. The model includes the time scales of both the electron-hole motion and the dielectric polarization. A free electron or hole forms an electronic polaron, in which the bare electron or hole delocalizes over about four unit cell!; before developing a polarization cloud. In the 1 B-1(u) exciton state, the time scale for electron-hole motion is comparable to that of the polarization. (If a fast dielectric response is assumed, the polarization energy is overestimated by about 60%.) For the Pariser-Parr-Pople Hamiltonian, polarization stabilizes a free electron-hole pair by about 1.5 eV and the exciton by about 0.2 eV, thereby lowering the exciton-binding energy by 1.3 eV. This reduction in exciton-binding energy occurs with relatively minor effects on the form of the exciton itself, indicating that the electron and hole must shed their polarization when they join to form an exciton. The electron-hole interaction in the exciton is then nearly identical to that on an isolated chain. This indicates, more generally, that the effective strength of the dielectric medium varies depending on the nature of charge fluctuations in a particular state. This observation may help resolve many issues concerning the relative importance of electron-electron interactions and electron correlation in these materials.