In this work, the effective fragment potential (EFP) method is fully integrated (FI) into the fragment molecular orbital (FMO) method to produce an effective fragment molecular orbital (EFMO) method that is able to account for all of the fundamental types of both bonded and intermolecular interactions, including many-body effects, in an accurate and efficient manner. The accuracy of the method is tested and compared to both the standard FMO method as well as to fully ab initio methods. It is shown that the FIEFMO method provides significant reductions in error while at the same time reducing the computational cost associated with standard FMO calculations by up to 96%.