Conjugated polymers with alternating electron-withdrawing and electron-donating groups along their backbone (donor–acceptor copolymers) have recently attracted attention due to high power conversion efficiency in bulk heterojunction solar cells. In an effort to understand how the bandgap in a typical donor–acceptor copolymer is reduced by internal charge transfer character and what the implications of this charge transfer are, we have synthesized the isolated repeat unit (CDTBT) of the photovoltaically highly successful PCDTBT polymer. We compare here the spectroscopic and electrochemical properties of the polymer, the repeat unit, and the separate carbazole donor and dithienylbenzothiadiazole acceptor moieties (CB and dTBT, respectively) in the solid state and in solutions of various polarity. The results are interpreted with the help of time-dependent density functional theory (TD-DFT) calculations. We identify the dominant electronic transitions responsible for the first two absorption bands in the “camel back” spectrum of PCDTBT as partial charge transfer transitions with significant delocalization in the directly excited states. The low bandgap, overall shape, and partial charge transfer character of the PCDTBT absorption spectrum originate from transitions in the dTBT unit. The attached CB moiety extends the conjugation length in CDTBT, rather than acting as a localized donor. Further electronic delocalization, leading to a relatively small reduction in bandgap, occurs upon polymerization. We use our finding of higher delocalization following excitation in the second absorption band to explain the increased yield of photogenerated charges from this band in PCDTBT solid thin films. Moreover, we point out the importance of initial delocalization in the functioning of bulk heterojunction solar cells. The results presented here are therefore not only highly important for a better understanding of donor–acceptor copolymers in general but can also potentially guide the strategic development of future photovoltaic materials.