Cloud fraction observations and trade-wind inversion base heights from both GATE and the undisturbed period of ATEX are examined for diurnal variation. The cloud fraction tends to be larger in the morning than in the afternoon. The inversion base height has a morning maximum and an afternoon minimum. A time series of horizontal divergence is calculated using ATEX wind data. The maximum divergence occurs in the morning at about 0700 LST. A one-dimensional time-dependent trade-wind boundary layer model is used to study diurnal variations. A scheme is used that includes solar heating below as well as within the inversion in the cloud-covered portion of the model boundary layer. Using this parameterized heating distribution, the model reasonably simulates the observed diurnal variations. Model experiments are carried out to ascertain the effects of the solar heating distribution and horizontal divergence on diurnal variation. The model-simulated diurnal variation of the cloud cover, inversion height, and the thermodynamic and moisture structure of the cloud layer is sensitive to the partitioning of the solar heating between the top half of the cloud layer and the inversion. The variations due to divergence and solar radiation appear to contribute additively to the total diurnal variation of the model inversion height. The observations and model results support the conclusion that significant diurnal variation of the trade-wind boundary layer occurs and is primarily due to the diurnal variation of radiative forcing and secondarily to diurnally varying large-scale divergence.