We extend the usual world-volume action for a Dp-brane to the case of N coi
ncident Dp-branes where the world-volume theory involves a U(N) gauge theor
y. The guiding principle in our construction is that the action should be c
onsistent with the familiar rules of T-duality. The resulting action involv
es a variety of potential terms, i.e. nonderivative interactions, for the n
onabelian scalar fields. This action also shows that Dp-branes naturally co
uple to RR potentials of all form degrees, including both larger and smalle
r than p + 1. We consider the dynamics resulting from this action for Dp-br
anes moving in nontrivial background fields, and illustrate how the Dp-bran
es are "polarized" by external fields. In a simple example, we show that a
system of D0-branes in an external RR four-form field expands into a noncom
mutative two-sphere, which is interpreted as the formation of a spherical D
2-D0 bound state.