Quantum mechanical response theory represents a convenient way of addressing calculations of excited states and their properties in molecular systems. Today, quantum chemical response theory is a well-established tool within computational quantum chemistry for isolated molecules. In this chapter, we discuss how to extend the capabilities of quantum mechanical response theory to molecules subjected to an environment—this being either the case of a simple solvent or the more challenging case of a biological matrix such as a protein. Specifically, we will be concerned with a detailed and coherent presentation of the theoretical background and derivation of the polarizable embedding model. For this model, we will derive and discuss the physical and mathematical expressions for response functions and equations based on the physical picture of a chromophore embedded into an environment. Following the derivation of the polarizable embedding scheme, we discuss how to connect response functions and their residues to the calculation of selected molecular properties such as one- and two-photon absorption strengths. Finally, we discuss a few results for specific molecular systems showing the generally broad applicability of the method developed.