Extracting knowledge-based statistical potential from known structures of proteins is proved to be a simple, effective method to obtain an approximate free-energy function. However, the different compositions of amino acid residues at the core, the surface, and the binding interface of proteins prohibited the establishment of a unified statistical potential for folding and binding despite the fact that the physical basis of the interaction (water-mediated interaction between amino acids) is the same. Recently, a physical state of ideal gas, rather than a statistically averaged state, has been used as the reference state for extracting the net interaction energy between amino acid residues of monomeric proteins. Here, we find that this monomer-based potential is more accurate than an existing all-atom knowledge-based potential trained with interfacial structures of dimers in distinguishing native complex structures from docking decoys (100% success rate vs. 52% in 21 dimer/trimer decoy sets). It is also more accurate than a recently developed semiphysical empirical free-energy functional enhanced by an orientation-dependent hydrogen-bonding potential in distinguishing native state from Rosetta docking decoys (94% success rate vs. 74% in 31 antibody–antigen and other complexes based on Z score). In addition, the monomer potential achieved a 93% success rate in distinguishing true dimeric interfaces from artificial crystal interfaces. More importantly, without additional parameters, the potential provides an accurate prediction of binding free energy of protein–peptide and protein–protein complexes (a correlation coefficient of 0.87 and a root-mean-square deviation of 1.76 kcal/mol with 69 experimental data points). This work marks a significant step toward a unified knowledge-based potential that quantitatively captures the common physical principle underlying folding and binding. A Web server for academic users, established for the prediction of binding free energy and the energy evaluation of the protein–protein complexes, may be found at http://theory.med.buffalo.edu. Proteins 2004. © 2004 Wiley-Liss, Inc.