Eight years of cloudiness data from the International Satellite Cloud Climatology Project (ISCCP) were analyzed to study the diurnal variation and its annual variation. An empirical orthogonal function (EOF) analysis technique was used to analyze the ISCCP C‐2 monthly hourly data. Results show that most of the diurnal variation is explained by the first two dominant EOF modes, which explain the diurnal cycle of clouds. On the basis of this analysis, two modes of diurnal cycle of clouds are defined. Mode 1 as defined by the first EOF indicates that cloudiness maximum occurs at 0500 or 1500 local solar time (LST); Mode 2 as defined by the second EOF indicates that cloudiness maximum occurs at 1000 or 2000 LST. In a broad sense, Mode 1 explains the diurnal cycle of low‐level cloudiness, and Mode 2 explains the diurnal variation of high‐level cloudiness. Mode 1 explains 58.5% of the normalized variance, and Mode 2 explains 25% of the normalized variance. Both modes of the diurnal cycle show annual variation. The Mode 1 annual variation is large along the western boundary currents over the oceanic regions and moist convective regions over the continents. Interestingly, this annual variation of the diurnal cycle of cloudiness bears some relationship with the annual variation of the surface temperature. This relationship is such that the cloudiness is maximum in the early morning when the annual surface temperature is at its minimum and in the afternoon when the annual surface temperature is at its maximum.