An energy-dependent wave operator theory of quantum dynamics is derived for time-independent and time-dependent Hamiltonians. Relationships between Green's functions, wave operators, and effective Hamiltonians are investigated. Analytical properties of these quantities are especially relevant for studying resonances. A derivation of the relationship between the Green's functions and the (t,t') method of Peskin and Moiseyev [J. Chem. Phys. 99, 4590 (1993)] is presented. The observable quantities can be derived from the wave operators determined with the use of efficient iterative procedures. As in the theory of Bloch operators for bound states, the theory is based on a partition of the full Hilbert space into three subspaces: the model space, an intermediate space, and the outer space. On the basis of this partition an alternative definition of active spaces currently considered in large scale calculations is suggested. A numerical illustration is presented for several model systems and for the Stark effect in the hydrogen atom.