Abstract
We propose a scheme to generate a large Kerr nonlinearity based on electromagnetically induced transparency in a single atom placed in a high-finesse microcavity. We perform a thorough analysis of the system dynamics using a dressed states approach. This system is shown to create a photon blockade effect equivalent to that for an ideal Kerr nonlinearity as recently proposed by Imamoglu et al 1997 Phys. Rev. Lett. 79 1467.