A new large-scale cloud and precipitation scheme, which accounts for the subgrid-scale variability of clouds, is coupled to NCAR's Regional Climate Model (RegCM). This scheme partitions each grid cell into a cloudy and noncloudy fraction related to the average grid cell relative humidity. Precipitation occurs, according to a specified autoconversion rate, when a cloud water threshold is exceeded. The specification of this threshold is based on empirical in-cloud observations of cloud liquid water amounts. Included in the scheme are simple formulations for raindrop accretion and evaporation. The results from RegCM using the new scheme, tested over North America, show significant improvements when compared to the old version. The outgoing longwave radiation, albedo, cloud water path, incident surface shortwave radiation, net surface radiation, and surface temperature fields display reasonable agreement with the observations from satellite and surface station data. Furthermore, the new model is able to better represent extreme precipitation events such as the Midwest flooding observed in the summer of 1993. Overall, RegCM with the new scheme provides for a more accurate representation of atmospheric and surface energy and water balances, including both the mean conditions and the variability at daily to interannual scales. The latter suggests that the new scheme improves the model's sensitivity, which is critical for both climate change and process studies. ¿ 2000 American Geophysical Union