Multireference electronic structure methods, like the complete active space (CAS) self-consistent field model, have long been used to characterize chemically interesting processes. Important work has been done in recent years to develop modifications having a lower computational cost than CAS, but typically these methods offer no more chemical insight than that from the CAS solution being approximated. In this paper, we present the localized active space-state interaction (LASSI) method that can be used not only to lower the intrinsic cost of the multireference calculation but also to improve interpretability. The localized active space (LAS) approach utilizes the local nature of the electron-electron correlation to express a composite wave function as an antisymmetrized product of unentangled wave functions in local active subspaces. LASSI then uses these LAS states as a basis from which to express complete molecular wave functions. This not only makes the molecular wave function more compact but also permits flexibility in choosing those states to be included in the basis. Such selective inclusion of states translates to the selective inclusion of specific types of interactions, thereby allowing a quantitative analysis of these interactions. We demonstrate the use of LASSI to study charge migration and spin-flip excitations in multireference organic molecules. We also compute the J coupling parameter for a bimetallic compound using various LAS bases to construct the Hamiltonian to provide insights into the coupling mechanism.