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.