Base pairs involving post-transcriptionally modified nucleobases are believed to play important roles in a wide variety of functional RNAs. Here we present our attempts towards understanding the structural and functional role of naturally occurring modified base pairs by analyzing their distribution in different RNA classes, with the help of crystal structure and sequence database analyses. In addition, we quantify the variation in geometrical features of modified base pairs within RNA structures, and characterize their optimum geometries and binding energies using advanced quantum chemical methods. Further comparison of modified base pairs with their unmodified counterparts illustrates the effect of steric and electronic structure alterations due to base modifications. Analysis of specific structural contexts of modified base pairs in RNA crystal structures revealed several interesting scenarios, including those at the tRNA:rRNA interface, antibiotic-binding site and the three-way junctions within tRNA, which when analyzed in context of available experimental data, allowed us to correlate the occurrence and strength of modified base pairs with the specific functional roles they play in context of RNA macromolecules.