A theory is developed of the anomalous magnetic and electric birefringence in the isotropic phase of nematic liquid crystals taking into account orientational correlations between neighbouring molecules. Use is made of a modification of Bethe’s method due to Krieger and James, and the properties of the system are derived in terms of a single parameter, viz., the two-particle interaction constant. The expressions for the magnetic and electric birefringence are similar in form to those given by the phenomenological model of de Gennes. Theoretical curves forp-azoxyanisole reproduce the trends in the observed data. A calculation of the nematic-isotropic transition point confirms that this treatment is an improvement over the mean field approximation in describing pre-transition phenomena in the isotropic phase.