Active microwave limb sounding is a possible technique for measuring water vapor in the upper troposphere and lower stratosphere, and here a first assessment of the retrieval capabilities of transmission measurements in the range 10--35 GHz is presented. The proposed observing system consists of a constellation of low Earth orbiters measuring atmospheric transmission at the frequencies 10.3, 17.2, and 22.6 GHz. The use of these relatively long wavelengths guarantees a minimal, for being a remote sensing technique, influence from scattering. The original objective of the measurements was to derive water vapor profiles, but the potential to retrieve the liquid water content of clouds was also identified during the study. Retrieval errors due to thermal noise, gain instability, and spectroscopic uncertainties were considered. With the assumed instrument characteristics a measurement precision for water vapor in the upper troposphere of 5--10% is obtained, with capability to observe through ice clouds and clouds with a low water content.