Multiple intermolecular H-bonding interactions play a pivotal role in determining the macroscopic state of ionic liquids (ILs). Hence, the relationship between the microscopic and the macroscopic properties is key for a rational design of new imidazolium ILs. In the present work, we investigated how the physicochemical property of hydroxyl-functionalized imidazolium chloride is connected to the molecular structure and intermolecular interactions. In the isolated ion pair, strong N-H···Cl H-bonding interactions are observed rather than H-bonding interactions at the acidic C2-H site and alkyl-OH···Cl of the hydroxyl-functionalized imidazolium chloride. However, the N-H···Cl H-bonding interaction of the cation plays a significant role in ion-pair formations and polymeric clusters. For 3-(2-Hydroxy)-1H-imidazolium chloride (EtOHImCl), the oxygen atom (O) engages in two significant interactions within its homodimeric ion-pair cluster: N-H···O and alkyl OH···Cl. Vibrational spectroscopy and DFT calculations reveal that the chloride ion (Cl−) forms a hydrogen bond with the C2-H group via a C2-H···Cl interaction site. Natural Bond Orbital (NBO) analysis indicates that the O-H···Cl hydrogen-bonding interaction is crucial for the stability of the IL, with a second-order perturbation energy of approximately 133.8 kJ/mol. Additional computational studies using Atoms in Molecules (AIMs), non-covalent interaction (NCI) analysis, Electron Localization Function (ELF), and Localized Orbital Locator (LOL) provide significant insights into the properties and nature of non-covalent interactions in ILs. Ab initio molecular dynamics (AIMD) simulations of the IL demonstrate its stable states with relatively low energy values around −1680.6510 atomic units (a.u.) at both 100 fs and 400 fs due to O-H···Cl and C-H···Cl interactions.