An effective nucleon-nucleon interaction is constructed from the extended Reid soft-core potential using the lowest order Brueckner theory of nuclear matter with the continuous choice of the single particle spectrum. A nucleus-nucleus potential is derived from the effective two-nucleon interaction using the energy-density formalism. The effect of the Delta (1236) isobar on the effective interaction and the nucleus-nucleus potential is studied. It is observed that with the inclusion of the Delta -isobar the nucleus-nucleus potential gets diluted which is quite prominent in the high-density overlap region.