We show that noncommutative gauge theory in two dimensions is an exactly
solvable model. A cohomological formulation of gauge theory defined on the
noncommutative torus is used to show that its quantum partition function can be
written as a sum over contributions from classical solutions. We derive an
explicit formula for the partition function of Yang-Mills theory defined on a
projective module for arbitrary noncommutativity parameter \theta which is
manifestly invariant under gauge Morita equivalence. The energy observables are
shown to be smooth functions of \theta. The construction of noncommutative
instanton contributions to the path integral is described in some detail. In
general, there are infinitely many gauge inequivalent contributions of fixed
topological charge, along with a finite number of quantum fluctuations about
each instanton. The associated moduli spaces are combinations of symmetric
products of an ordinary two-torus whose orbifold singularities are not resolved
by noncommutativity. In particular, the weak coupling limit of the gauge theory
is independent of \theta and computes the symplectic volume of the moduli space
of constant curvature connections on the noncommutative torus.Comment: 52 pages LaTeX, 1 eps figure, uses espf. V2: References added and
repaired; V3: Typos corrected, some clarifying explanations added; version to
be published in Communications in Mathematical Physic