Density-functional method with different basis sets was applied to the study of the highly efficient and low sensitive explosive 3-nitro-1,2,4-triazole-5-one (NTO) in both gaseous dimer and its bulk state. The binding energies have been corrected for the basis set superposition errors. Six stable dimers (II-VII) were located. The corrected binding energy of the most stable dimer VII is predicted to be -53.66 kJ/mol at the B3LYP/6-311++G** level. It was found that the structures of the more stable dimers (V-VII) are through the hydrogen bonding interaction between the carbonyl oxygen and the azole hydrogen of 3-nitro-1,2,4-triazole-5-one. The changes of Gibbs free energies (DeltaG) in the processes from the monomer to the dimers at 298.15 K are 8.51, 0.90, 0.35, -8.74, -10.67, and -11.06 kJ/mol for dimers from II to VII, respectively. Dimers V-VII, possessing cyclic structures, can be spontaneously produced from the isolated monomer at room temperature. The lattice energy is -156.14 kJ/mol, and this value becomes to -150.43 kJ/mol when a 50% correction of the basis set superposition error was adopted. The frontier bands are quite flat. Judged from the value of band gap of 4.0 eV, it may be predicted that 3-nitro-1,2,4-triazole-5-one is an insulator. Most atoms in NTO, with the exception of C-5 atom and the nitro atoms, make up the upper valence bands. In contrast, the lower conduction bands mainly consist of the nitro N and O atoms. The population of the C-NO2 bond is much less than those of the other bonds and the detonation may be initiated by the breakdown of this bond. (C) 2004 American Institute of Physics.