We investigate the dynamic polarization potential (DPP) due to the coupling to collective states, which is an important element in a unified approach to describe all the different types of nuclear reaction processes. The construction of the nonlocal andl‐dependent DPP is based on the projection operator formalism of Feshbach. Dispersion relations between real and imaginary parts are discussed. We present an approach that can calculate the elastic scattering, direct reaction, and fusion cross sections simultaneously with a single DPP. For this purpose, a rapid method of solving the nonlocal Schro¨dinger equation is first developed to obtain theexactsolution. The separation of the DPP into direct reaction and fusion parts is then formulated. We show that such a separation made phenomenologically in a local space nicely explains the observed data. Finally the localization of the nonlocal DPP is discussed in order to justify the phenomenological local optical model potential.