Ab initio Car-Parrinello molecular dynamics simulations of a Li+ ion in water have been carried out using the density-functional theory with Becke-Lee-Yang-Parr (BLYP) functional and ultrasoft Vanderbildt pseudopotentials. Both structural and dynamical properties of Li+ have been studied in detail and compared with available neutron scattering and spectroscopic data. Excellent agreement is obtained with the existing experimental data for the structure of the first hydration shell around the Li+ ion. Spectral features of bound water are compared to those of bulk water. Reasonable agreement is obtained with IR and Raman experiments. The ab initio simulation results have also been used to derive a Li+-water interaction potential. The best fit of the data gave a simple single-exponential potential function, which reproduces very well the liquid structure from the original ab initio simulations. This potential model, together with the simple point charge (SPC) water model, was applied to calculate the hydration free energy of Li+ using the Expanded Ensemble method. (C) 2001 American Institute of Physics.