**Abstract**

Density Functional Theory (DFT) is a powerful and commonly employed quantum mechanical tool for investigating various aspects of matter. The research in this field ranges from the development of novel analytical approaches focused on the design of precise exchange-correlation functionals to the use of this technique to predict the molecular and electronic configuration of atoms, molecules, complexes, and solids in both gas and solution phases. The history to DFT's success is the quest for the exchange-correlation functional, which utilizes density to represent advanced many-body phenomena inside one element formalism. If a precise exchange-correlation functional is applied, it may correctly describe the quantum nature of matter. The estimated character of the exchange-correlation functional is the basis for DFT implementation success or failure. Hohenberg-Kohn established that every characteristic of a system in ground state is a unique functional of its density, laying the foundation for DFT, which is being utilized to explore the novelty of materials. This chapter is aimed to present an overview of DFT by explaining the theoretical background, commonly used approximations as well as their recent developments and challenges faced along-with new horizons.

**Keywords:** DFT, Kohn-Sham equations, exchange-correlation functionals, challenges
