One embodiment of the present invention provides a system that accurately models polarization states of an illumination source in an optical lithography system for manufacturing integrated circuits. During operation, the system starts by receiving a two-dimensional (2D) grid map for an illumination source pupil in the optical lithography system. The system then constructs a source-polarization model for the illumination source by defining a polarization state at each grid point in the grid map. Next, the system enhances a lithography model for the optical lithography system by incorporating the source-polarization model into the lithography/OPC model.