We extend the discrete dipole method to enable the analysis and design of two-dimensional magnetoelectric metamaterial devices based on transformation optics. Key to this method is the evaluation of the dipole moments of the metamaterial elements, which can be accomplished within the framework of a rigorous Bloch wave model based on lattice sums. Corrections to the polarizabilities for spatial dispersion and magnetoelectric coupling are included in the formulation of a generalized Clausius-Mossotti relationship. We demonstrate the utility of the extended approach by designing a cloaking structure that shows considerably improved performance over that designed by assuming the standard Clausius-Mossotti relationship between constitutive parameter and polarizability. © 2014 AIP Publishing LLC.