Applications of new retrieval methods to old satellite data allowed us to study the effects of smoke from the Kuwait oil fires in 1991 on clouds and precipitation. The properties of smoke-affected and smoke-free clouds were compared on the background of the dust-laden desert atmosphere. Several effects were observed: (1) clouds typically developed at the top of the smoke plume, probably because of solar heating and induced convection by the strongly absorbing aerosols; (2) large salt particles from the burning mix of oil and brines formed giant cloud condensation nuclei (CCN) close to the source, which initiated coalescence in the highly polluted clouds; (3) farther away from the smoke source, the giant CCN were deposited, and the extremely high concentrations of medium and small CCN dominated cloud development by strongly suppressing drop coalescence and growth with altitude; and (4) the smaller cloud droplets in the smoke-affected clouds froze at colder temperatures and suppressed both the water and ice precipitation forming processes. These observations imply that over land the smoke particles are not washed out efficiently and can be transported to long distances, extending the observed effects to large areas. The absorption of solar radiation by the smoke induces convection above the smoke plumes and consequently leads to formation of clouds with roots at the top of the smoke layer. This process dominates over the semidirect effect of cloud evaporation due to the smoke-induced enhanced solar heating, at least in the case of the Kuwait fires.