The electronic structure of LiFePO4 and delithiated FePO4 is revisited in the light of the previous calculations taking into account the coulomb correlation potential for d-electrons. The nature of the optical transitions across the energy gap is investigated. In LiFePO4, these are intra-atomic Fe2+−Fe3+ transitions suffering a strong Franck−Condon effect due to the local distortion of the lattice in FePO4, which is indirect evidence of the formation of a small polaron. This situation contrasts with that met in the much more covalent delithiated phase, where the optical transition across the energy gap is associated with a transfer of an electron from the p-states of the oxygen to the d-states of iron ions. The small polarons in LiFePO4 are associated with the presence of Fe3+ ions introduced by native defects in relative concentration [Fe3+]/[Fe2++Fe3+] = 3 × 10-3 in the samples known to be optimized with respect to their electrochemical properties. The nearest iron neighbors around the central polaron site are spin-polarized by the indirect exchange mediated by the electronic charge in excess. These small magnetic polarons are responsible for the interplay between electronic and magnetic properties that are quantitatively and self-consistently analyzed.