Motivated by the great advance in graphene hydroxide--a versatile material with various applications--we performed density functional theory (DFT) calculations to study the functionalization of the two-dimensional hexagonal boron nitride (h-BN) sheet with hydroxyl (OH) radicals, which has been achieved experimentally recently. Particular attention was paid to searching for the most favorable site(s) for the adsorbed OH radicals on a h-BN sheet and addressing the roles of OH radical coverage on the stability and properties of functionalized h-BN sheet. The results indicate that, for an individual OH radica, the most stable configuration is that it is adsorbed on the B site of the h-BN surface with an adsorption energy of -0.88 eV and a magnetic moment of 1.00 μ(B). Upon adsorption of more than one OH radical on a h-BN sheet, however, these adsorbates prefer to adsorb in pairs on the B and its nearest N atoms from both sides of h-BN sheet without magnetic moment. An energy diagram of the average adsorption energy of OH radicals on h-BN sheet as a function of its coverage indicates that when the OH radical coverage reaches to 60 %, the functionalized h-BN sheet is the most stable among all studied configurations. More importantly, this configuration exhibits good thermal and dynamical stability at room temperature. Owing to the introduction of certain impurity levels, the band gap of h-BN sheet gradually decreases with increasing OH coverage, thereby enhancing its electrical conductivity.