  We present a study of the paramagnetic metallic and insulating phases of
vanadium sesquioxide by means of the $N$th order muffin-tin orbital
implementation of density functional theory combined with dynamical mean-field
theory. The transition is shown to be driven by a correlation-induced
enhancement of the crystal field splitting within the $t_{2g}$ manifold, which
results in a suppression of the hybridization between the $a_{1g}$ and
$e_g^{\pi}$ bands. We discuss the changes in the effective quasi-particle band
structure caused by the correlations and the corresponding self-energies. At
temperatures of about 400 K we find the $a_{1g}$ orbitals to display coherent
quasi-particle behavior, while a large imaginary part of the self-energy and
broad features in the spectral function indicate that the $e_g^{\pi}$ orbitals
are still far above their coherence temperature. The local spectral functions
are in excellent agreement with recent bulk sensitive photoemission data.
Finally, we also make a prediction for angle-resolved photoemission experiments
by calculating momentum-resolved spectral functions.
