Thulium-doped yttrium aluminum garnet (Tm:YAG) is an important solid-state laser crystal. The energy-level splitting within it is still an unresolved problem. Here, we perform a theoretical study on the microstructure of Tm³⁺-doped YAG using the CALYPSO structure search method in conjunction with first-principles calculations. The calculated results show that the 4.16% doping concentration of Tm³⁺ impurity causes an obvious structural distortion of YAG crystal, forming an orthorhombic phase in C222 symmetry. On the basis of our developed WEPMD method, we obtain a new and complete set of free-ion and crystal field parameters by a good fit (with proper irreducible representations) to 69 observed energy levels and determine the exact energy-level splitting of Tm³⁺ in YAG. The calculated Stark levels and electric dipole transitions are in excellent agreement with the measured data and similar theoretical calculations. Some promising emission lines between ³F₃, ³F₂, ¹D₂, and ¹I₆ states are presented. These findings offer fundamental insights and practical tools for further exploration of the structural and electronic properties of other transition-metal-doped YAG crystal. Copyright © 2018 American Chemical Society.