Calculations　based　on　density　functional　theory　(DFT)　are　performed　to　reveal　the　interplay　between　the　yttrium　dopant　and　oxygen　vacancy　in　the　structure　of　zirconia.　Non-compensated　and　compensated　yttrium　stabilized　zirconia　(YSZ)　systems　are　introduced.　Oxygen　deficient　ZrO2　models　are　also　simulated　to　investigate　the　influence　of　oxygen　vacancy　on　the　structure　and　optoelectronic　properties　of　the　system.　Comparing　the　structure　of　different　models,　the　compensated　YSZ　systems　provided　better　structure　stability.　Charge　compensation　is　very　crucial　for　stabilizing　the　structure　of　ZrO2.　Different　compensated　YSZ　models　are　introduced　and　their　structural,　electronic　and　optical　properties　are　compared.　The　compensated　YSZ　system　having　two　Y3+　atoms　at　Zr4+　sites　along　with　one　oxygen　vacancy　(named　as　Zr14Y2O31)　provided　very　clear　band　gap.　Very　slight　change　in　the　optical　response　of　Zr14Y2O31　is　found　compared　to　pure　zirconia.　It　is　concluded　that　not　only　yttrium　dopant　nor　oxygen　vacancy　is　only　responsible　for　the　structure　stability　of　ZrO2.　The　synergistic　effect　due　to　yttrium　dopant　and　oxygen　vacancy　leads　to　the　improved　stability,　suitable　band　structure　and　non-modified　optical　response　of　zirconia.　©　2017　IOP　Publishing　Ltd.