We investigated the role of oxygen vacancy in n-type interface of LaAlO3 (LAO) overlayer on SrTiO3 (STO) (001) by carrying out density-functional-theory calculations. Comparing the total energies of the configurations with one vacancy in varying locations we found that oxygen vacancies favor to appear first in LAO surface. These oxygen vacancies in the surface generate a two-dimensional distribution of carriers at the interface, resulting in band bending at the interface in STO side. Dependent on the concentration of oxygen vacancies in LAO surface, the induced carrier charge at the interface partially or completely compensates the polar electric field in LAO. Moreover, the electronic properties of oxygen vacancies in STO are also presented. Every oxygen vacancy in STO generates two electron carriers, but this carrier charge has no effect on screening polar field in LAO. Band structures at the interface dependent on the concentrations of oxygen vacancies are presented and compared with experimental results.