In this paper, a novel lidar/radar method for simultaneously determining cloud particle effective size profiles (for water and ice clouds) and the lidar attenuation profile is described. Simulations and application to real data show that this procedure can be quite robust even in cases where significant lidar attenuation is present. In addition, the concept of a suitable lidar/radar effective particle size is introduced, and the determination of water contents for both water and ice clouds using this effective size together with the radar reflectivity profile is discussed. This paper concludes by presenting examples of effective size profiles and water content profiles inferred from measurements made during the Dutch Clouds and Radiation (CLARA) campaign. In a companion paper, it is demonstrated that the results of the inversion procedure compare favorably with infrared radiometer measurements as well as with in-situ measurement results. ¿ 2001 American Geophysical Union