Born-Oppenheimer molecular dynamics of p-nitro aniline (PNA) in water was carried out and the electronic structure was investigated by time-dependent density functional theory. Hydrogen bonding involving the PNA nitro and amine groups and the water molecules leads to an similar to 160 cm(-1) red shift of the nu(N-O) and v(N H) stretching frequencies relative to the gas phase species. Our estimate for the peak position of the charge transfer (CT) band in the absorption spectrum of PNA in water (similar to 3.5 eV) is in good agreement with experimental data (3.3 eV). We have investigated the specific role played by local hydrogen bonding and electrostatic interactions on the electronic absorption spectrum. It is shown that although electrostatic interactions play a major role for explaining the structure of the PNA CT band in water, the theoretical prediction of the observed red shift is improved by the explicit consideration of local hydrogen bonding of PNA to water. For isolated PNA, we predict that the dipole moment of the second excited state (S-2) is 9.6 D greater than ground state (S-0) dipole, which is in good agreement with experimental information (8.2-9.3 D). Calculation of charge transfer indexes for the two first excitations of PNA in water indicates that despite the-feature that a small fraction of Si states (<5%) may exhibit some CT character, CT states in solution are mainly associated with S-2 <- S-0 transitions.