AbstractThe effect of cloud‐radiation interactions on cloud properties is examined in the context of a limited‐domain cloud‐resolving model. The atmospheric cloud radiative effect (ACRE) influences the areal extent of tropical high clouds in two distinct ways. The first is through direct radiative destabilization of the elevated cloud layers, mostly as a result of longwave radiation heating the cloud bottom and cooling the cloud top. The second effect is radiative stabilization, whereby cloud radiative heating of the atmospheric column stabilizes the atmosphere to deep convection. In limited area domain simulations, the stabilizing (or indirect) effect is the dominant role of the cloud radiative heating, thus reducing the cloud cover in simulations where ACRE is included compared to those where it is removed. Direct cloud radiative heating increases high cloud fraction, decreases mean cloud optical depth, and increases cloud top temperature. The indirect cloud radiative heating decreases high cloud fraction, but also decreases mean cloud optical depth and increases cloud top temperature. The combination of these effects increases the top‐of‐atmosphere cloud radiative effect. In mock‐Walker circulation experiments, the decrease in high cloud amount owing to radiative stabilization tends to cancel out the increase in high cloud amount owing to the destabilization within the cloud layer. The changes in cloud optical depth and cloud top pressure, however, are similar to those produced in the limited area domain simulations.