An textit{ab initio} electronic structure calculation based on the generalized gradient approximation in the density functional theory is carried out to study the basic electronic states of hollandite vanadate K$_2$V$_8$O$_{16}$. We find that the states near the Fermi energy consist predominantly of the three $t_{2g}$-orbital components and the hybridization with oxygen $2p$ orbitals is small. The $d_{yz}$ and $d_{zx}$ orbitals are exactly degenerate and are lifted from the $d_{xy}$ orbital. The calculated band dispersion and Fermi surface indicate that the system is not purely one-dimensional but the coupling between the VO double chains is important. Comparison with available experimental data suggests the importance of electron correlations in this system.