It is shown that localization is necessary to preserve size consistency in nonlinear extrapolations of molecular energies. We demonstrate that the unphysical behavior of Mulliken populations obtained from extended basis set wave functions can lead to incomplete localization of orbitals by the Pipek-Mezey population localization method, and introduce a modification to correct this problem. The new localization procedure, called minimum population localization, is incorporated into the CBS-QB3 and the new CBS-4M model chemistries, and their performance is assessed on the G2/97 test set. The errors found for CBS-QB3 are comparable with those for the G3 and G3(MP2) (mean absolute deviation of 1.10, 0.94, and 1.21 kcal/mol, respectively, on the G2/97 test set). The CBS-4M is less accurate than the other models (mean absolute deviation of 3.26 kcal/mol on the G2/97 test set), but can be applied to much larger systems. The modified localization method resolves several problem cases found with CBS-4 and improves the reliability of CBS-QB3. (C) 2000 American Institute of Physics. [S0021-9606(00)31015-7].