  We explore the properties of low lying eigenmodes of fermions in the quenched
approximation of lattice QCD. The fermion action is a recently proposed overlap
action and has exact chiral symmetry. We find that chiral zero-eigenvalue modes
are localized in space and their positions correlate strongly with the
locations (as defined through the density of pure gauge observables) of
instantons of the appropriate charge. Nonchiral modes are also localized with
peaks which are strongly correlated with the positions of both charges of
instantons. These correlations slowly die away as the fermion eigenvalue rises.
Correlators made of quark propagators restricted to these modes closely
reproduce ordinary hadron correlators at small quark mass in many channels. Our
results are in qualitative agreement with the expectations of instanton liquid
models.
