Based on density functional theory (DFT) calculations, we perform an extensive investigation of intrinsic point defects and Xe impurities in uranium monocarbide (UC). The DFT calculations involve both the conventional generalized gradient approximation (GGA) and the GGA+U approach with the Hubbard parametric term (U), using up to 5×5×5 supercells. GGA calculations for the formation energy of intrinsic defects demonstrate the significant effect of using larger supercells than in previous studies. Results confirm that the ⟨111⟩ and ⟨100⟩ dumbbell interstitials are the most stable interstitial configurations for U and C, respectively. The interstitial mechanisms are favored for self-diffusion of both uranium and carbon and diffusion of Xe under equilibrium conditions. Calculations also reveal that the Xe substitutional defect at the C lattice site tends to adopt an off-site configuration, which can be interpreted as a Xe interstitial–C vacancy complex. We also utilize GGA+U to assess the impact of effective U parameter (Ueff) on the results. Moreover, we introduce a method to estimate the carbon chemical potential by fitting the phase diagram composition data and propose a selection Ueff=1.25 eV based on the experimental Xe diffusion activation energy. With this approach, GGA+U calculations reproduce the available experimental data for the formation energy of the carbon Frenkel pair and can explain the stepwise recovery of intrinsic properties and burst Xe release behavior in UC observed in annealing experiments.