We introduce a novel approach to the accurate and efficient calculation of the optical properties of defect structures embedded in photonic crystals (PCs). This approach is based on an expansion of the electromagnetic field into optimally adapted photonicWannier functions, which leads to effective lattice models of the PC structures. Calculations for eigenmode frequencies of simple and complex cavities as well as the dispersion relations for straight waveguides agree extremely well with the results from numerically exact supercell calculations. Similarly, calculations of the transmission through variouswaveguiding structures agree verywellwith the results of corresponding finite-difference time domain simulations. Besides being substantially more efficient than standard simulation tools, the Wannier function approach offers considerable insight into the nature of defect modes in PCs. With this approach, design studies and accurate simulation of optical anisotropic and non-linear defects aswell as detailed investigations of disorder effects in higherdimensional PCs become accessible.