  We present a novel approximation scheme for the treatment of strongly
correlated electrons in arbitrary crystal lattices. The approach extends the
well-known dynamical mean field theory to include nonlocal two-site
correlations of arbitrary spatial extent. We extract the nonlocal correlation
functions from two-impurity Anderson models where the impurity-impurity
distance defines the spatial extent of the correlations included. Translational
invariance is fully respected by our approach since correlation functions of
any two-impurity cluster are periodically embedded to $k$-space via a Fourier
transform. As a first application, we study the two-dimensional Hubbard model
on a simple-cubic lattice. We demonstrate how pseudogap formation in the
many-body resonance at the Fermi level results from the inclusion of nonlocal
correlations.
