The structural, electronic, and adsorption properties of chlorine on pristine, tin-, aluminum-, and fluorine-substituted In2O3 nanostructures are successfully optimized and computed using density functional theory along with the B2LYP/LanL2DZ basis set. The electronic properties of pristine, tin-, aluminum-, and fluorine-substituted In2O3 nanostructures are discussed in terms of ionization potential, HOMO–LUMO gap, and electron affinity. The dipole moment and point symmetry group of In2O3 nanostructures are also reported. The structural stability of pristine, tin-, aluminum-, and fluorine-substituted In2O3 nanostructures are investigated in terms of formation energy. The adsorption properties of chlorine on In2O3 are studied and the most appropriate adsorption sites of Cl2 on In2O3 nanostructures are reported. The adsorption properties of hydrogen on In2O3 nanostructures are also investigated and inferred that In2O3 exhibits good sensing characteristics towards hydrogen. The adsorbed energy, HOMO–LUMO gap, Mulliken population analysis, and average energy gap variation are used to identify the prominent adsorption site of Cl2 on In2O3 material. The substitution of fluorine in In2O3 nanostructures enhances the Cl2 adsorption properties in the mixed gas atmosphere.