The newly observed isomer and ground-state band in the odd-Z neutron-rich rare-earth nucleus $^{163}$Eu are investigated by using the cranked shell model (CSM) with pairing treated by the particle-number conserving (PNC) method. This is the first time detailed theoretical investigations are performed of the observed $964(1)$ keV isomer and ground-state rotational band in $^{163}$Eu. The experimental data are reproduced very well by the theoretical results. The configuration of the $964(1)$ keV isomer is assigned as the three-particle state $frac{13}{2}^{-}( ufrac{7}{2}^{+}[633]otimes ufrac{1}{2}^{-}[521]otimespifrac{5}{2}^{+}[413]$). More low-lying multi-particle states are predicted in $^{163}$Eu. Due to its significant effect on the nuclear mean field, the high-order $varepsilon_{6}$ deformation plays an important role in the energy and configuration assignment of the multi-particle states. Compared to its neighboring even-even nuclei $^{162}$Sm and $^{164}$Gd, there is a $10%sim15%$ increase of $J^{(1)}$ of the one-particle ground-state band in $^{163}$Eu. This is explained by the pairing reduction due to the blocking of the nucleon on the proton $pifrac{5}{2}^{+}$[413] orbital in $^{163}$Eu.
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