We developed a method for obtaining effective cluster interactions in substitutional binary alloys from first-principles total-energy calculations. The method reproduces not only the formation energies, but also the ground-state line and relative energies of different structures. These quantities are crucial if the energy parametrization is to be used to compute the temperature-composition phase diagram of the alloy system. We applied the method to the Pd-V alloys, and obtained insight into the energetics of this complex alloy system. We showed that pair cluster interactions of long range (seventh or eighth nearest neighbor) are necessary to reproduce the ground-state line of the fcc Pd-rich superstructures.