The layered niobium cluster halide, alpha-Nb3Cl8, offers a potentially rich chemistry because of its morphology and electronic structure. Substitution of chloride by telluride, driving forces for mixed crystal formation, and possible structural distortions on intercalation in alpha-Nb3Cl8 are probed using both experimental and theoretical techniques. The compound Nb3TeCl7, has been synthesized in quantitative yield from the reactants Nb, NbCl5, and Te and has been structurally characterized by single-crystal X-ray diffraction. Nb3TeCl7 crystallizes in the space group P (3) over bar m1 (no. 164); a=6.8985(12) Angstrom; c=12.6351(26) Angstrom; Z=2; R=0.0238; wR=0.0392. The structure consists of Nb-3 triangular clusters singly capped by mu(3)-Te atoms. Physical measurements and semiempirical electronic structure calculations demonstrate the closed subshell nature of the bonding in this compound. In addition, these calculations predict a structural instability for Nb3Cl8-type halides when the cluster valence electron concentration rises above 7.5 electrons per Nb-3 cluster, and provide a rationale for the observed homogeneity width within the alpha-Nb3-xCl8 system (0 less than or equal to x less than or equal to 0.5).