A diffusion equation-based systematic homogenization theory and a self-consistent dehomogenization theory for fuel assemblies have been developed for use with coarse-mesh nodal diffusion calculations of light water reactors. The theoretical development is based on a multiple-scales asymptotic expansion carried out through second order in a small parameter, the ratio of the average diffusion length to the reactor characteristic dimension. By starting from the neutron diffusion equation for a three-dimensional heterogeneous medium and introducing two spatial scales, the development systematically yields an assembly-homogenized global diffusion equation with self-consistent expressions for the assembly-homogenized diffusion tensor elements and cross sections and assembly-surface-flux discontinuity factors. The reactor eigenvalue 1/keff is shown to be obtained to the second order in the small parameter, and the heterogeneous diffusion theory flux is shown to be obtained to leading order in that parameter. The latter of these two results provides a natural procedure for the reconstruction of the local fluxes and the determination of pin powers, even though homogenized assemblies are used in the global nodal diffusion calculation.