A theoretical study on the interaction of oxygen atom on InP(001)-(2x4) surface and InP(001)/HfO2 (001) interface was performed using density functional theory method. Our result on surface oxidation shows that the replacement of In/P with oxygen induces the gap states in the bulk band gap whereas the oxygen adsorption does not induce the gap states due to saturation of surface dangling bonds. It also shows that the stability of the surface increases with the increase of oxygen content on the surface indicating a strong tendency for oxidation. Based on the surface oxidation model study, we have also examined the InP/HfO2 modeling interface electronic structures under varying oxidization condition. This study helps to understand the origin of surface gap states upon oxidation of the surface and interfacial gap states when InP is interfaced with HfO2. We also plan to compare with the experimental data to elucidate the microscopic mechanisms of the gap state development and possible approaches to control them.