A converged model containing the NbOF52- cluster surrounded by 10 K+ ions described by effective core potentials (ECPs) embedded into 36 unit cells of (partial-)point charges was used to calculate the electronic structure of the K2NbOF5 crystal. These calculations were performed with several ab initio methods: CIS, TD-HF and CAS(6,5) with the 6-31+G(d) basis sets for O and F and the ECP-SBK basis set for Nb being the most adequate ones. The effects of the surrounding (partial-)point charges are significant and a proper description by ECPs of the nearest ions (10 K+) is important, even for a qualitative model. The luminescence of the K2NbOF5 crystal is related to the charge-transfer transitions from the 2p lone-pair at the oxo ion to the 4d0 orbitals of the Nb(V). The 4d orbitals on Nb are more strongly perturbed as the NbO (niobyl) bond distance decreases, and are shifted upwards. Whereas, changes in the Nb–O bond distance do not affect the lowest transition energies. These results, in addition to a detailed analysis of the molecular orbitals involved in the transitions, corroborate localized behavior of the lowest transitions, which are characterized as charge-transfer bands within the niobyl moiety. A semi-quantitative description of the K2NbOF5·H2O crystal photophysics was obtained with the CAS(6,5)/6-31+G(d) method, where the flatness of the ground and first excited states minima explains the uncertainties in the crystallographic position of the Nb ions as well as the very large broadening of the observed bands.