The paper presents a computational study of the ground and excited states of 3-methylindole. The ground-state geometry is optimized using the DFT B3LYP potential in conjunction with a 6-31+G(d) basis set. In addition the ground and first and second excited singlet states are optimized, for the first time, using the CASSCF method with an ANO-S basis set. The results are compared with experiment and with the experimental and theoretical literature data for the parent indole. The calculated excitations are in agreement with the absorption data. The comparison also shows that the 3-methylindole relaxation of the second excited-state terminates in an avoided crossing. The relaxed geometry of the second excited 3-methylindole state is therefore of mixed L-1(a)/L-1(b) nature. The interaction of 3-methylindole with water is also examined, revealing three stable chromophore-water complexes. The calculations are extended to the more stable chromophore(water)(2) complexes. The excitation energies of these complexes are calculated using the CASPT2 method (ANO-S type basis). Calculations using ESP-charges instead of water molecules demonstrate the usefulness of such approximation for the calculation of excitation energy shifts. Analogous results are obtained using Amber5.0 point charges.