This review summarizes recent first-principles investigations of the electronic structure and magnetism of dilute magnetic semiconductors (DMSs), which are interesting for applications in spintronics. Details of the electronic structure of transition-metal-doped III-V and II-VI semiconductors are described, especially how the electronic structure couples to the magnetic properties of an impurity. In addition, the underlying mechanism of the ferromagnetism in DMSs is investigated from the electronic structure point of view in order to establish a unified picture that explains the chemical trend of the magnetism in DMSs. Recent efforts to fabricate high-$T_C$ DMSs require accurate materials design and reliable $T_C$ predictions for the DMSs. In this connection, a hybrid method (ab initio calculations of effective exchange interactions coupled to Monte Carlo simulations for the thermal properties) is discussed as a practical method for calculating the Curie temperature of DMSs. The calculated ordering temperatures for various DMS systems are discussed, and the usefulness of the method is demonstrated. Moreover, in order to include all the complexity in the fabrication process of DMSs into advanced materials design, spinodal decomposition in DMSs is simulated and we try to assess the effect of inhomogeneity in them. Finally, recent works on first-principles theory of transport properties of DMSs are reviewed. The discussion is mainly based on electronic structure theory within the local-density approximation to density-functional theory.

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