A wide variety of computational algorithms have been developed that strive to capture the chemical similarity between two compounds for use in virtual screening and lead discovery. One limitation of such approaches is that, while a returned similarity value reflects the perceived degree of relatedness between any two compounds, there is no direct correlation between this value and the expectation or confidence that any two molecules will in fact be equally active. A lack of a common framework for interpretation of similarity measures also confounds the reliable fusion of information from different algorithms. Here, we present a probabilistic framework for interpreting similarity measures that directly correlates the similarity value to a quantitative expectation that two molecules will in fact be equipotent. The approach is based on extensive benchmarking of 10 different similarity methods (MACCS keys, Daylight fingerprints, maximum common subgraphs, rapid overlay of chemical structures (ROCS) shape similarity, and six connectivity-based fingerprints) against a database of more than 150,000 compounds with activity data against 23 protein targets. Given this unified and probabilistic framework for interpreting chemical similarity, principles derived from decision theory can then be applied to combine the evidence from different similarity measures in such a way that both capitalizes on the strengths of the individual approaches and maintains a quantitative estimate of the likelihood that any two molecules will exhibit similar biological activity.