An ab initio molecular dynamics simulations of hydration of Li+ ion was done. Density-functional theory with Becke-Lee-Yang-Parr (BLYP) functional and ultrasoft Vanderbildt pseudopotentials was used. It showed that the lithium ion has a well defined first hydration shell of four water molecules in a tetrahedral symmetry. The data obtained from the simulations was used to construct an effective interaction potential model for Li+-water interactions. The potential model with simple point charge (SPC) water model was applied to calculate the hydration free energy of lithium ion.