The gas-phase proton transfer reaction of nitric acid-ammonia and the effect of the first three water molecules are investigated by high level ab initio calculations on the molecular clusters HNO3-NH3-(H2O)(n), n = 0,1,2,3. The equilibrium structures, binding energies, and harmonic frequencies of the clusters as well as the potential energy surfaces along the proton transfer pathway of nitric acid-ammonia are calculated at the second-order Moller-Plesset perturbation (MP2) level with two extended basis sets 6-31 + G(d) and 6-311 + + G(d,p). It is found that, either without water or with one water molecule, the nitric acid-ammonia system exists as hydrogen bonded, with nitric acid acting as the hydrogen bond donor and ammonia as the acceptor. With two or three water molecules, the system becomes an ion pair resulting from the complete transfer of a proton from the nitric acid to ammonia. The potential energy surfaces along the proton transfer pathway are analyzed to understand the effect of the water molecules. The water molecules stepwise added into the system are found to increase the stability of the ion pair over the hydrogen bonded form. The first water molecule is not enough to stabilize the ion pair, but it results in a flatter potential energy pathway for the proton transfer. The second water molecule produces additional stabilization energy which helps fully stabilize the ion pair. The third water molecule contributes to further stabilize the ion pair. The harmonic frequencies and infrared intensities of the clusters are analyzed, which provide further evidence in agreement with the transition from the hydrogen bond to the ion pair structure as the water molecules are stepwise introduced. On the basis of these results, we conclude that ammonium nitrate might be formed by the gas phase reaction of nitric acid with ammonia in the presence of adequate water vapor.