The introduction of selenium into DNA in the place of oxygen provides a unique opportunity for studying the fidelity of DNA replication, as well as providing advantages in the growth of DNA crystals and the greater resolution of their structures. However, the atomic mechanisms of the relative stability and base pair recognition of the selenium-modified DNA are poorly understood. In the present study, quantum mechanics calculations were performed on base pairings, base stacking, and base-water interactions for both unmodified thymine and thymine with the 2-exo-oxygen replaced with selenium, and the results were used to develop and validate CHARMM force field parameters for the 2-Se-thymine. Sub-sequently, molecular dynamics simulations and free-energy perturbation calculations were performed on 11-base DNA sequences containing native thymine and the 2-Se-thymine. The calculated relative free-energy values are in good agreement with experimentally determined relative stability, where the 2-Se-thymine offers similar stability to T-A in cognate DNA, while it dramatically destabilizes the DNA containing the T-G mismatch base pair when 2-Se-thymine is incorporated. Thus, 2-Se-thymine largely increases the native T-A base pair fidelity by discouraging the T-G wobble pair. Insights into the high pairing specificity and the relative stability of selenium-modified DNA were obtained based on detailed structural and energetic analysis of molecular dynamics trajectories. Our studies move one step further toward an understanding of the high base pair fidelity and thermodynamic properties of Se-DNA in solution and in protein-DNA complexes.