The electronic structure and optical properties of SnO2 with consideration of oxygen vacancy are computed using the first-principles plane-wave pseudopotential method based on the density functional theory. The results show that SnO2 with oxygen vacancy has a band gap of 1.03 eV, and the Fermi level shift upward to the conduction band, showing a typical n-type character; besides oxygen vacancy would introduce a new electronic state within the band gap compared with that of pure SnO2. Moreover, certain impurity levels are located near the top of the valence band, which narrows the band gap of the compound. Optical properties, including the dielectric function, reflectivity, absorption coefficient and the energy-loss spectrum are calculated and the results are in good agreement with the experiments. The calculated absorption coefficient shows that SnO2 with oxygen vacancy exhibits an absorption band in the visible region, centered at 2.10 eV (588 nm). It is demonstrated that oxygen vacancy causes the visible light absorption band. (C) 2012 Elsevier B. V. All rights reserved.