In this work, a series of ab-initio calculations based on density functional theory is presented. We investigated the properties of water and the inclusion complexes of cyclodextrins with various guest compounds such as phenol, aspirin, pinacyanol chloride dye and binaphtyl molecules in the environment of water as solvent. Our investigation of water includes the cluster units of water, the bulk properties of the liquid water and the crystalline ice structure. Some equilibrium structures of water clusters were prepared and their binding energies were calculated with the self-consistency density functional tight binding (SCC-DFTB) method. The global minimum water clusters of TIP4P classical modelled potential were also calculated using the DFTB method and Vienna Ab-initio Simulation Package (VASP). All results show a non-linear behaviour of the binding energy per water molecule against water cluster size with some anomalies found for the lower clusters between 4 and 8 molecules. We also calculated the melting temperatures of these water clusters having solid-like behaviour by heating. Though, the melting region of the heated structures is not well defined as a result of the pronounced fluctuations of the bonding network of the system giving rise to fluctuations in the observed properties, but nevertheless the range where the breakdown occurs was defined as the melting temperature of the clusters. The bulk properties of the liquid, such as radial distribution functions, calculated with the VASP method show good agreement with neutron diffraction scattering data with respect to positions and height of the peaks. The DFTB method gives good positions of the peaks but with too broad peaks due the approximations on which the method relies, which makes it less accurate. Due to the complexity of the hydrogen bonding network, it is difficult to obtain the real ice structure by mere cooling liquid water under normal condition without imposing external constraints such as extreme external pressure or electric field. A special rule of proton ordering was followed in order to prepare the real ice structure for our calculations. We succeeded in preparing a hexagonal tetrahedrally coordinated type of ice. The statical properties of this ice were calculated as well as the phonon spectra. The results were compared with neutron diffraction data and other available ab-initio} calculations. The molecular dynamics simulations of inclusion complexes of beta-cyclodextrin with each of these guest molecules, phenol and aspirin show the encapsulation which are in good agreement with dichroism measurements. The inclusion complex of a dimer calculation of pinacyanol dye with some droplet of water inside gamma-cyclodextrin shows structural properties which can be ascribed to the experimental observation of UV/CD spectra of the chromophores, in which there is a split of the excited states of the monomer units. The calculations on chiral molecules of binaphtyl-beta-cyclodextrin complex shows a longitudinal axis as preferred axis of entry of the binaphtyl during the inclusion process rather than an axial propagation in agreement with circular dichroism measurements. The investigated chiral separation ability of beta-cyclodextrin on the enantiomeric pair of this compound R and S, which differ in symmetry only by reflection, shows that the S-enantiomer has lower energy than the R-enantiomer as revealed by our ab-initio calculations.