We have studied the electric field near water clusters and in ice Ih using first principles calculations. We employed Moller-Plesset perturbation theory (MP2) for the calculations of the clusters up to and including the hexamer, and density functional theory (DFT) with a gradient dependent functional [Perdew-Wang (PW91)] for ice Ih as well as the clusters. The electric field obtained from the first principles calculations was used to test the predictions of an induction model based on single center multipole moments and polarizabilities of an isolated water molecule. We found that the fields obtained from the induction model agree well with the first principles results when the multipole expansion is carried out up to and including the hexadecapole moment, and when polarizable dipole and quadrupole moments are included. This implies that accurate empirical water interaction potential functions transferable to various environments such as water clusters and ice surfaces could be based on a single center multipole expansion carried out up to the hexadecapole. Since point charges are not included, the computationally intensive Ewald summations can be avoided. Molecular multipole moments were also extracted from the first principles charge density using zero flux dividing surfaces as proposed by Bader. Although the values of the various molecular multipoles obtained with this method are quite different from the ones resulting from the induction model, the rate of convergence of the electric field is, nevertheless, quite similar. (C) 2000 American Institute of Physics. [S0021-9606(00)52505-7].