A simple but accurate coupled-wave theory describing diffraction from a volume grating is developed, which applies to planar diffraction geometries with the electric field polarized normal to the plane of incidence. Modulation of the dielectric and the absorption properties of the medium are considered, and the analysis is developed for gratings nonuniform with depth and for composite (multiplexed) gratings. The theory is based axiomatically on Maxwell's equations, and no approximations or simplifying assumptions other than those requisite to the scalar wave formulation of the theory enter into the analysis (except that for computational applications, only a finite number of diffracted orders may be retained in the analysis).