ABSTRACT We present a novel framework to self-consistently model the effects of radiation fields, dust physics, and molecular chemistry (H2) in the interstellar medium (ISM) of galaxies. The model combines a state-of-the-art radiation hydrodynamics module with a H and He non-equilibrium thermochemistry module that accounts for H2 coupled to an empirical dust formation and destruction model, all integrated into the new stellar feedback framework SMUGGLE. We test this model on high-resolution isolated Milky-Way (MW) simulations. We show that the effect of radiation feedback on galactic star formation rates is quite modest in low gas surface density galaxies like the MW. The multiphase structure of the ISM, however, is highly dependent on the strength of the interstellar radiation field. We are also able to predict the distribution of H2, that allow us to match the molecular Kennicutt–Schmidt (KS) relation, without calibrating for it. We show that the dust distribution is a complex function of density, temperature, and ionization state of the gas. Our model is also able to match the observed dust temperature distribution in the ISM. Our state-of-the-art model is well-suited for performing next-generation cosmological galaxy formation simulations, which will be able to predict a wide range of resolved (∼10 pc) properties of galaxies.