Indium-doped zinc oxide (IZO) is an n-type semiconductor and an alternative to indium tin oxide, which is widely used in transparent electrodes. In order to design and prepare optical and electrical functional materials with IZO, it is important to understand the effects of indium (In) doping on zinc oxide (ZnO). In this study, the local structures and electronic properties of IZO were investigated by first-principle calculations. The formation energies of IZO with the substitution of an In atom in the place of a Zn atom were determined to be less than those of IZO with the intercalation of In atoms into interstitial sites in ZnO regardless of the amount of In atoms. From analyzing calculated band structures for the substitution and intercalation models, the relationship between the effect of In dopant and the conductivity of IZO is discussed.