As*

NaFe_0.5Cu_0.5As represents a rare exception in the metallic iron pnictide family, in which a small insulating gap is opened. Based on first-principles study, we provide a comprehensive theoretical characterization of this insulating compound. The Fe³⁺ spin degree of freedom is quantified as a quasi-1D S=5/2 Heisenberg model. The itinerant As hole state is downfolded to a p_xy-orbital hopping model on a square lattice. A unique orbital-dependent Hund's coupling between the spin and the hole is revealed. Several important material properties are analyzed, including (a) factors affecting the small p−d charge-transfer gap; (b) role of the extra interchain Fe; and (c) the quasi-1D spin excitation in the Fe chains. The experimental manifestations of these properties are discussed.