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We present experimental data that show that the greatly improved performance of a new class of photorefractive polymers [see Donckers et al., Opt. Lett. 18, 1044 (1993)] is too large to be explained by the simple electro-optic photorefractive effect alone. In these materials a photoconducting polymer host is doped with a small concentration of a sensitizer and a large concentration of a nonlinear optical chromophore that has orientational mobility at ambient temperatures. We present a theoretical model for a new orientational enhancement mechanism in which both the birefringence of the sample and the electro-optic coefficient are periodically modulated by the space-charge field itself. The predictions of this model for the size of the enhancement (which is greater than an order of magnitude in diffraction efficiency), the polarization anisotropy between p-polarized and s-polarized readout, and the presence of index …