The NASA Earth Radiation Budget Experiment (ERBE), flying aboard multiple satellites, is providing new insights into the climate system. Monthly averaged clear-sky and cloudy sky flux data derived from the ERBE are used to assess the impact of clouds on the Earth's radiation balance. This impact is examined in terms of three quantities: longwave, shortwave, and net cloud forcing. Overall, clouds appear to cool the Earth-atmosphere system. The global mean cooling varied from 14 to 21 W m−2 between April 1985 and January 1986. Hemispherically, the longwave and shortwave cloud forcing nearly cancel each other in the winter hemisphere, while in the summer the negative shortwave cloud forcing is significantly lower than the longwave cloud forcing, producing a strong cooling. Thus clouds significantly reduce the seasonal changes in the net radiative heating of the planet. This reduction is particularly strong over the mid- and high-latitude oceans, where they reduce the summer and spring solar heating by as much as 100–150 W m−2. In the low latitudes, the longwave and shortwave cloud forcing reach peak values over the convectively disturbed regions and tend to offset each other to a large extent. This feature, when combined with the large cooling effect over mid- and high-latitude oceans, leads to the conclusion that clouds significantly reduce the equator-to-pole radiative heating gradient of the planet during spring and summer. In the tropical convective regions the large magnitudes of the shortwave and longwave forcing and the near cancellation of the two suggest that clouds have a significant influence on the vertical distribution of heating between the atmosphere and the surface. Thus the ERBE data reveal that globally, hemispherically, and zonally, clouds have a significant effect on the radiative heating gradients. Comparisons of the ERBE results with general circulation models (GCMs) show that global net cloud forcing can be determined reasonably well from some current versions of the GCMs. Modeled regional and zonal values of radiative cloud forcing, however, indicate a need for considerable improvement.