The renormalization-group (RG) method is applied to the problem of formation of a localized state of a particle moving in a given potential. It is shown that RG transformation on the particle's Green's function can be performed exactly. The fixed-point equations yield information on the critical binding strength, while the transformation equations near the fixed points give scaling laws and critical exponents, e.g., for the dependence of the localization radius on the energy and the potential strength. The general theory is illustrated by considering the simplest case of the Slater-Koster problem in detail. We find that it is possible to take all the irrelevant variables into account and thus obtain the exact result for the critical binding point. Critical exponents and scaling laws are, however, universal in character. The method is then extended to the case of motion in random potentials, and some applications are pointed out. In particular it is shown that the RG properties of the averaged absolute value squared ($〈{\mathrm{}\left|G\right|\mathrm{}}^2〉$) of the Green's function do not correspond to a simple second-order phase transition. The analysis illustrates certain features of RG methods which have not heretofore been encountered in other problems and which are likely to be found in treatments of disordered materials. In particular, the runaway behavior observed in the RG transformation of $〈G〉$ and $〈{\mathrm{}\left|G\right|\mathrm{}}^2〉$ as well as in many random-spin systems, might be associated with the formation of bound states in the band tail for any amount of randomness.

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