In this work, we present ab initio derived intermolecular potentials for the urea-water system. Our method of calculation, which is termed NEMO, is based on intermolecular perturbation theory. Dipole moment fluctuations as well as many-body effects in an assembly of molecules are described by including atomic polarizabilities in the potential. For the urea dimer we found a cyclic minimum with an energy of -21.9 kcal/mol and two equivalent hydrogen bonds of length 1.77 Angstrom. Noteworthy is that this interaction energy is more than four times larger than the water dimer minimum energy. To be able to satisfactorily model the interaction between two urea molecules we have improved the NEMO approach in the description of the repulsion energy and we have also included a more accurate damping on the dispersion energy. With this improved model we reinvestigated the water dimer and urea-water potentials and found good agreement with earlier potentials derived with similar approaches. From simulations of liquid water we investigated the sensitivity of structural properties resulting from small changes in repulsion parameters. Qualitative changes of the tetrahedral hydrogen bonding may occur for inappropriate parameter choices of the same potential surface.