The binding energies, electronic structures and optical properties of LiNbO3 and Cu/Fe doped LiNbO3 crystals are investigated by first principles based on the density functional theory in this paper. The supersell structures of crystals are established each with 60 atoms, including five models: pure LiNbO3, LN1 (Cu2+ occupy Li+ site), LN2 (Fe3+ occupy Li+ site), LN3 (Cu2+ occupy Li+site and Fe3+ occupy Li+ site) and LN4 (Cu2+ occupy Li+ site and Fe3+ occupy Nb5+ site). The optimized results show that the total energies of all models can achieve certain stable values, which means that the models accord with the actual crystal structures. The impurity energy levels of Cu and Fe doped LiNbO3 crystals appear within the band gaps, which are contributed by Cu 3d orbital, Fe 3d orbital and O 2p orbital; in co-doped LiNbO3, Cu offers deep energy level and Fe offers shallow energy level within the band gaps. There are two wide absorption peaks appearing respectively at 445 nm and 630 nm in co-doped LiNbO3 crystal, which correspond to the electron transitions from Eg orbital of Cu to Nb 4d orbital and T2g orbital of Fe to Nb 4d orbital respectively; the absorption edge of Cu, Fe mono and co-doped LiNbO3 crystals are red-shift successively, which coincides with the variation of band gape. The light absorption intensity of co-doped LiNbO3 crystal is stronger than that of mono-doped LiNbO3 crystal. The co-doped sample light absorption property is related to Fe site occupation. In this paper, it is suggested that the co-doped sample with Fe at Nb site is more competitive than that with Fe at Li site in optical volume holographic storage applications, and that reducing properly [Fe2+]/[Fe3+] value may be conducible to the formation of this advantage.