Multi-year surface and satellite observations of cloud amounts have been combined to estimate the full three-dimensional structure of clouds for a three-layer atmosphere. This analysis provides new insight into the vertical structure of clouds and the interactions with atmospheric radiation. For instance, a simple vertical overlap parameter has been derived which is very consistent with general climatology. In addition radiative transfer model calculations show that both the mean net heating rates within the atmosphere and the perturbations of cloud radiative forcing at the top are very sensitive to variations in the overlap parameter. ¿ 2000 American Geophysical Union