Microphysical processes responsible for the formation and dissipation of water and ice clouds have been incorporated into the Colorado State University General Circulation Model in order to 1) yield a more physically based representation of the components of the atmospheric moisture budget, 2) link the distribution and optical properties of the model-generated clouds to the predicted cloud water and ice amounts, and 3) produce more realistic simulations of cloudiness and the earth's radiation budget. The bulk cloud microphysics scheme encompasses five prognostic variables for the mass of water vapor, cloud water, cloud ice, rain, and snow. Graupel and hail are neglected. Cloud water and cloud ice are predicted to form through large-scale condensation and deposition processes and also through detrainment at the tops of cumulus towers. The production of rain and snow occur through autoconversion of cloud water and cloud ice. Rain drops falling through clouds can grow by collecting cloud water, and falling snow can collect both cloud water and cloud ice. These collection processes are formulated using the continuous collection equation. Evaporation of cloud water, cloud ice, rain, and snow are allowed in subsaturated layers. Melting and freezing are included. We also provide a coupling between convective clouds and stratiform anvils through the detrainment of cloud water and cloud ice at the tops of cumulus towers. Interactive cloud optical properties provide the link between the cloud n-microphysics and radiation parameterizations; the optical depths and infrared emissivities of large-scale stratiform clouds are parameterized in terms of the cloud water and cloud ice paths. Two annual-cycle numerical simulations are performed to assess the impact of cloud microphysics on the hydrological cycle. In the “EAULIQ” run, large-scale moist processes and cloud optical properties are driven by the bulk cloud microphysics parameterization. In the “CONTROL” run, condensed water is immediately removed from the atmosphere in the form of rain, which may evaporate as it falls through subsaturated layers. Stratiform ice clouds are not considered in CONTROL. When clouds are present, cloud optical depths and cloud infrared emissivities are dependent on the mean cloud temperatures. Results are presented in terms of January and July monthly averages. Emphasis is placed on the spatial distributions of cloud water, cloud ice, rain, and snow produced by the cloud microphysics scheme. In EAULIQ, cloud water and cloud ice are more abundant in the middle latitudes than in the Tropics, suggesting that large-scale condensation contributes a major part to the production of condensed water. Comparisons between the simulated vertically integrated cloud water and die columnar cloud water retrievals from satellite microwave measurements over the global oceans indicate a reasonable agreement. Interactions between the cloud micro- physics and cumulus convection parameterizations lead to smaller, more realistic precipitation rates. In particular, the cumulus precipitation rate is strongly reduced when compared to CONTROL.