The electronic structure of squaric acid (H2C4O4, SQA) has been investigated by density functional techniques at the B3LYP/6-31G** level to understand the mechanism of the paraelectric-to-antiferroelectric phase transition in the compound at 373 K. A nonsymmetrical structure without a C-4 axis has been used for the first time. Monomer, dimer, and pentamer models of the SQA system were used to assess the possible differences between the two intersecting O-H...O chains. Despite the use of a small cluster size, we felt that the noted differences in the energetics and related characteristics of the two chains in the crystal lattice are realistic. This result suggests different proton dynamics along the chains and thus argues against the generally accepted 2-D phase-transition behavior. The calculations also help explain the literature discrepancies involving earlier C-13 NMR and diffraction data. They support a model in which the phase transition is triggered by thermally induced disorder of the H atoms in the more pi-resonant O...H-O bonds, which in turn leads to the 3-D ordering of the two mutually perpendicular Ising-type chains.