Estimation of the range- and height-dependent index of refraction over the sea surface facilitates prediction of ducted microwave propagation loss. In this paper, refractivity estimation from radar clutter returns is performed using a Markov state space model for microwave propagation. Specifically, the parabolic approximation for numerical solution of the wave equation is used to formulate the refractivity from clutter (RFC) problem within a nonlinear recursive Bayesian state estimation framework. RFC under this nonlinear state space formulation is more efficient than global fitting of refractivity parameters when the total number of range-varying parameters exceeds the number of basis functions required to represent the height-dependent field at a given range. Moreover, the range-recursive nature of the estimator can be easily adapted to situations where the refractivity modeling changes at discrete ranges, such as at a shoreline. A fast range-recursive solution for obtaining range-varying refractivity is achieved by using sequential importance sampling extensions to state estimation techniques, namely, the forward and Viterbi algorithms. Simulation and real data results from radar clutter collected off Wallops Island, Virginia, are presented which demonstrate the ability of this method to produce propagation loss estimates that compare favorably with ground truth refractivity measurements.