The photochromic iridium(III) complex (Py-BTE)2Ir(acac) synthesized by Tan et al. [W. Tan et al., Org. Lett. 2009, 11, 161–164] has shown distinct photo-reactivity and photo-controllable phosphorescence. We here present a density functional theory study on the (Py-BTE)2Ir(acac) complex to explore the mechanism at the molecular level and to help further design of photochromic iridium(III) complexes with the desirable properties. The hybrid functional PBE0, with 25% Hartree–Fock exchange, is found to give an optimal structure compared with X-ray crystallographic data. The absorption bands are well reproduced by using time-dependent density functional theory calculations, lending the possibility to assign the metal-to-ligand and intra-ligand charge transfer transitions. The radiative and nonradiative deactivation rate constants, kr and knr, are rationalized for both the open-ring and closed-ring forms of the complex. The very large knr and small kr make the closed-ring form of the complex non-emissive. The triplet reactivity of the Py-BTE ligand is also studied by performing density functional theory calculations on the potential energy surfaces of the ground state and the lowest triplet state.