A new framework for calculating cloud droplet number, including a continuity equation for cloud droplet number concentration, has been developed and implemented in an extended version of the National Center for Atmospheric Research (NCAR) Community Atmosphere Model version 2.0.1 (CAM-2.0.1). The new continuity equation for cloud droplet number concentration consists of a nucleation term and several microphysical sink terms. The nucleation term is calculated on the basis of a parameterization of activation of cloud condensation nuclei (CCN). A subgrid distribution of vertical velocity is used to calculate the range of supersaturations determining the activation within each model grid box. The aerosol types considered in this study are sea salt, sulfate, black carbon, organic carbon, and mineral dust. The horizontal and vertical distributions of sulfate and carbonaceous aerosols are calculated on the basis of AEROCOM (http://nansen.ipsl.jussieu.fr/AEROCOM) sources. Microphysical sink terms for cloud droplets are obtained from a prognostic cloud water scheme, assuming a direct proportionality between loss of cloud water and loss of cloud droplets. On the basis of the framework described above, the cloud droplet number concentration and cloud droplet effective radius are determined. Cloud microphysical and radiative properties compare reasonably well with satellite observations, giving an indication of the soundness of our approach. Our method of fitting the aerosol size distribution with lognormal modes has been evaluated and was found not to introduce systematic errors in our approach. The aerosol indirect effect estimated in the new framework ranges from -0.13 W/m2 to -0.72 W/m2, which is significantly smaller than in most other comparable studies. This is largely due to the introduction of microphysical sinks for cloud droplets and a cloud droplet activation scheme which accounts for the so-called competition effect among CCN. As we are not allowing aerosol effects on cloud microphysics and radiation to feed back on the model meteorology, our estimates of the aerosol indirect effect do not include changes in relative humidity and cloud cover.