We present a combination of time-dependent density functional theory with the quantum mechanical/molecular mechanical approach which can be applied to study nonadiabatic dynamical processes in molecular systems interacting with the environment. Our method is illustrated on the example of ultrafast excited statedynamics of indole in water. We compare the mechanisms of nonradiative relaxation and the electronic state lifetimes for isolated indole, indole in a sphere of classical water, and indole + 3H2O embedded in a classical water sphere. In the case of isolated indole, the initial excitation to the S2 electronic state is followed by an ultrafast internal conversion to the S1 state with a time constant of 17 fs. The S1 state is long living (> 30 ps) and deactivates to the ground state along the N–H stretching coordinate. This deactivation mechanism remains unchanged for indole in a classical water sphere. However, the lifetimes of the S2 and S1 electronic states are extended. The inclusion of three explicit water molecules opens a new relaxation channel which involves the electron transfer to the solvent, leading eventually to the formation of a solvated electron. The relaxation to the ground state takes place on a time scale of 60 fs and contributes to the lowering of the fluorescence quantum yield. Our simulations demonstrate the importance of including explicit water molecules in the theoretical treatment of solvated systems.