We have developed a polarizable intermolecular potential function (PIPF) for simulation of liquid amides. The PIPF potential includes a pairwise additive component, consisting of the familiar Lennard-Jones and Coulomb form, and a nonadditive polarization term. The empirical parameters were optimized through a series of statistical mechanical Monte Carlo simulations of liquid formamide, N-methylacetamide (NMA), N-methylformamide (NMF), and N,N-dimethylformamide (DMF). In deriving the empirical potential functions, bimolecular complexes of the amides dimers were studied by ab initio molecular orbital calculations using the 6-31G(d) basis set, and the results were compared with the PIPF predictions. The computed heats of vaporization and densities for the liquids using the final parameters are within 2% and 3% of experimental values, respectively. The polarization effects are found to be significant in all liquids, ranging from 6% for DMF to 14% for formamide of the total liquid energy. Electrostatic and polarization components dominate in primary and secondary amides, while the van der Waals contribution is greater than electrostatic terms for the tertiary amide DMF. In the present parameter optimization, polarization energies and induced dipole moments in the liquids are compared with results obtained from separate Monte Carlo simulations employing a combined quantum mechanical and molecular mechanical (QM/MM) approach. In the latter calculation, one amide monomer is treated quantum mechanically by the semiempirical AM1 theory, which is embedded in the liquid of the same amide represented by the empirical OPLS potential. In addition, structural features including hydrogen-bonding interactions and radial distribution functions are examined and found to be in good agreement with the previous computational results.