First principles calculations using pseudopotentials and generalized gradient approximation (GGA) for the exchange-correlation energy show that addition of Si makes Eu doping in GaN energetically favorable. It breaks local symmetry around Eu ions and leads to shallow states below the conduction band that could facilitate intra-4f shell transitions. Silicon atoms on Ga sites act as intrinsic donors transforming Eu from a 3+ to a 2+ state. The half-filled 4f states with a 7 $\mu$ B magnetic moment on each Eu ion lie within the band gap of GaN and are narrower compared with the only-Eu doping case due to reduced hybridization with the host states. There is a tendency for clustering of Eu ions with ferromagnetic coupling and the ∼5-{\AA} interatomic distance, but EuN phase formation is unfavorable. Further effects of the inclusion of onsite Coulomb interaction U within GGA+U formalism on the electronic structure are discussed. {\textcopyright} 2012 American Physical Society.