X-ray absorption spectroscopy (XAS) and x-ray magnetic circular dichroism (XMCD) have been used to study transition metal impurities on K and Na films. The multiplet structure of the XAS spectra indicates that Fe, Co, and Ni have localized atomic ground states with predominantly d7, d8, and d9 character, respectively. XMCD shows that the localized impurity states possess large, atomiclike, magnetic orbital moments that are progressively quenched as clusters are formed. Ni impurities on Na films are found to be nonmagnetic, with a strongly increased d10 character of the impurity state. The results show that the high magnetic moments of transition metals in alkali hosts originate from electron localization.