Tropical montane cloud forests (TMCF) differ from lowland moist forests in structure (low stature, small and tough leaves, low diversity) and functioning (low productivity, low nutrient-cycling rates). To explain these differences, a variety of hypotheses have been proposed, most of which are related directly or indirectly to climate, but none of these provides a satisfactory explanation for all typical TMCF traits. The single climatic factor shared by all TMCF, the frequent occurrence of low cloud, has multiple effects, but not all are well understood. In this paper we describe and analyze the climatic and soil-moisture conditions prevailing in TMCF as reported in the literature. TMCF evapotranspiration is limited by both climatic conditions and canopy conductance. TMCF productivity is low, but our understanding of these forest’s carbon balance is incomplete. Leaf photosynthetic capacity is not particularly low, but canopy photosynthesis probably is, due to persistent cloudiness (low radiation) and a low leaf-area index (LAI). We suggest that the low LAI of TMCF is controlled by light climate and by leaf structure and longevity. TMCF productivity is probably further limited by a substantial investment of carbon in the growth and functioning of a relatively large root system, which is itself a consequence of unfavorable soil conditions.