This theory was developed by Linus Pauling and it explains the covalent bond formation between two atoms as the interaction or overlap of atomic orbitals. This theory can be described in following points.

(i) A covalent bond is formed when the orbital of one atom is situated in such a way that it overlaps with the orbital of another atom, each of them containing one unpaired electron.

(ii) The atomic orbitals overlap and the overlapped region is occupied by both the electrons. These two electron must have opposite spin.

(iii) As a result of this overlapping, there is maximum electron density between the two atoms. A large part of the binding force of covalent bond results from the attraction of these electrons by the nuclei of both the atoms.

(iv) Atoms maintain their individuality. When the bond is formed, only valence electrons from each bonded atom are involved and the inner atomic orbitals of each atom remain undisturbed.

The simplest example of bond formation by atomic orbital overlap is the formation of H₂ molecule. For two hydrogen atoms (say H₂ and H_b) which are infinitely apart i.e. when there is no a b interaction between them, their potential energy is taken as zero. As the two atoms approach each other, the electron of H_a is attracted by the nucleus of H_b and electron of H_b is similarly attracted by the nucleus of H_a . In an isolated hydrogen atom the electron is attracted by only a a single nucleus, but when two hydrogen atoms are close together, each of the two electrons experiences the attractive pull of two nuclei and energy is lowered. There will also be some repulsion between the two electrons and the two nuclei. At a certain distance between two nuclei these attractive and repulsive forces balance each other. At this distance the two hydrogen atoms form a stable grouping called a hydrogen molecule. This critical distance corresponding to the minimum energy and maximum stability is called the bond length. The energy decreased in this process is called bond energy.

This idea of electron sharing can also be expressed in terms of orbital overlap. When the two atoms are for apart, each electron occupies 1s orbital. As the two atoms approach near to each other, their orbitals overlap partly. The two electrons can now be shared through this overlapped region.