In this study, we employed ONIOM calculations to study functionalized single-wall carbon nanotubes (SWCNTs), for assessing an appropriate level of theory for accurate binding energies calculations, particularly by considering ozone adsorption and arylation. Although ONION! models reproduced the binding energies and geometries in relatively good agreement with the density functional theory B3LYP/6-31G* values in some cases, the 'same level different basis set' (SLDB) protocol, was shown to be more appropriate for studying SWCNTs, as the pi-network was preserved. We also found that sidewall functionalization deforms the tube significantly, and the use of any lower level methods could not describe bond breaking/forming appropriately. (C) 2004 Elsevier B.V. All rights reserved.