The results of electronic structure calculations for the one-dimensional magnetic chain compound Ca3Co2O6 are presented. The calculations are based on density functional theory and the local density approximation and used the augmented spherical wave (ASW) method. Our results allow for deeper understanding of recent experimental findings. In particular, alternation of Co 3d low-and high-spin states along the characteristic chains is related to differences in the oxygen coordination at the inequivalent cobalt sites. Strong hybridization of the d states with the O 2p states lays ground for polarization of the latter and the formation of extended localized magnetic moments centered at the high-spin sites. In contrast, strong metal-metal overlap along the chains gives rise to intrachain ferromagnetic exchange coupling of the extended moments via the d(3z2-r2) orbitals of the low-spin cobalt atoms. (C) 2004 Elsevier B.V. All rights reserved.