We present a combined Density Functional/Time Dependent Density Functional study of the molecular structure, electronic states, and optical absorption spectrum of [Ru(4,4'-COOH-2,2'-bpy)(2)(NCS)(2)], a widely used charge-transfer sensitizer in nanocrystalline TiO(2) solar cells. Calculations have been performed both for the complex in vacuo and in ethanol and water solvents, using a continuum model to account for solute-solvent interactions. Inclusion of the solvent leads to important changes of the energies and composition of the molecular orbitals of the complex; as a consequence, whereas the computed spectrum for the Ru-complex in vacuo deviates from the experimental one in both energy and shape, the spectra calculated in the presence of the solvent are in good agreement with the experiment. The first two absorption bands are found to originate from mixed ruthenium-NCS to bipyridine-pi* transitions rather than to pure metal-to-ligand-charge-transfer (MLCT) transitions, whereas the third band arises from intraligand pi --> pi* transitions. The experimentally observed blue-shift of the spectrum in water with respect to ethanol is well reproduced by our calculations and appears to be related to a decreased dipole moment in the excited state.