Clouds can exert strong effects on ecosystem CO2 and water vapor fluxes and may be important determinants of terrestrial primary production. We used three years of eddy-covariance and meteorological data from an aspen-dominated northern hardwood forest in Michigan to investigate how canopy photosynthesis (P), evapotranspiration (E), and water use efficiency (WUE) responded to changes in cloud cover, or the proportion of diffuse (If) to total (It) photosynthetically active radiation (PAR). Canopy quantum efficiency (the initial slope of the P versus PAR response curve) increased with increasing cloud cover, but both midday canopy P and canopy photosynthetic potential (the asymptote of the P versus PAR response curve) were greatest under partly cloudy skies (If/It..0.57). Midday canopy E decreased and midday canopy WUE increased with increasing If/It. The relationship between canopy P and cloud cover varied with soil moisture. Canopy P was insensitive to changes in soil moisture under overcast skies (If/It. 0.70), whereas under clearer skies, canopy P was lower during periods of low compared to high soil moisture. These results further our understanding of cloud cover effects on canopy physiological processes and will aid in more accurate assessments of forest responses to climatic change.