A method is developed for accurate retrieval of thin cloud optical depth from measurements of a multifilter rotating shadowband radiometer (MFRSR). A key feature of this technique is correction of strong forward scattering of solar radiation into the instrument's field of view, which causes underestimation of retrieved cloud optical depth. To develop the correction method, measurements from the MFRSR under various atmospheric conditions are simulated by using a modified DISORT code that can accurately compute radiative intensity for strong forward scattering by thin clouds. These simulations are used to develop a polynomial fitting technique that corrects forward scattering into direct beam component. The correction is then applied to real MFRSR measurements. First, temporal and spectral variations in direct beam observations are used to discriminate between aerosol and thin cloud conditions. The true thin cloud optical depth, then, is inferred by removing background aerosol optical depth and by applying the polynomial fitting technique to correct the forward scattering contribution. An analysis of uncertainties associated with this method is also conducted and the results show that the retrievals are accurate to better than 5% or 0.05 when optical depth is less than 1.