We briefly summarize the fundamental properties of correlated nanoscopic systems obtained within the EDABI method combining anexact diagonalizationin the Fock space with anab initioreadjustment of the single‐particle wave functions in the resultant ground state. Explicitly, we address the following questions: evolution of various systems from a nanometal to a nanoinsulator of the Mott‐Hubbard type, the appearance of the Mott‐Hubbard gap in molecular and cluster (Hn) systems, as well as the stability of those clusters. © 2003 American Institute of Physics