A new model potential is constructed for Li+-H2O, based largely on ab initio calculations of the monomer wavefunctions. The electrostatic energy is calculated using distributed multipoles, the induction and dispersion energies are calculated using damped multipole series, and the repulsion energy is assumed to be proportional to the charge density overlap integral. The model potential has a shallower well than most previous potentials; the smaller well depth is in agreement with new high-level supermolecule ab initio calculations. Spectroscopic data for Li+-H2O are not yet available, but will provide a rigorous test of the potential, so bound-state calculations of intermolecular vibration-rotation energy levels are performed in this work. The fundamental vibrational wave-numbers are found to be 357 cm-1, 538 cm-1 and 532 cm-1 for the out-of-plane bend, in-plane bend and intermolecular stretch vibrations, respectively.