We have studied the electronic and optical properties of transition metal oxide, AgAlO2. Full
potential linearize augmented plane wave (FP-LAPW) method is used to calculate the band structure,
TDOS, PDOS and optical properties. We have relaxed the geometry by minimizing the forces acting
on each atom. We assume that the structure is totally relaxed when the forces on each atom reach
values less than 1 mRy/a.u. We have performed band structure calculation and obtained better values
relative to experimental results. Our mBJ result for the band gap (2.69 eV) is closed to experimentalvalue (2.81 eV) than the previous theoretical ones (1.61 eV) . Which strongly support the fact that mBJ is accurate in finding the energy band gap of materials. From the PDOS we conclude that the valence band maximum is formed mostly from the Ag-d state. Optimization of the structure bring the bond lengths of Al−O and Ag−O close to the experimental values. Electronic charge density is calculated in the (1 0 0) and (-1 1 0) crystallographic planes and we found that the bonds exhibit greater percentage of covalent nature than the ionic nature. The optical properties are calculated and analyzed. The calculated absorption coefficient agrees well with the experiment that the compound have maximum absorption in the UV region and the tail of the absorption is extend till 413.0 nm.