This study provides comprehensive insight into the notable differences in clouds and precipitation simulated by the Energy Exascale Earth System Model (E3SM) atmosphere model version 0 (EAMv0) and version 1 (EAMv1). Several sensitivity experiments are conducted to isolate the impact of changes in model physics, resolution, and parameter choices on these differences. The overall improvement in EAMv1 clouds and precipitation is primarily attributed to the introduction of a simplified third‐order turbulence parameterization (CLUBB; Cloud Layers Unified By Binormals) (along with the companion changes) for a unified treatment of boundary layer turbulence, shallow convection, and cloud macrophysics, though it also leads to a reduction in subtropical coastal stratocumulus clouds (Sc). This lack of Sc is considerably improved by increasing vertical resolution from 30 to 72 layers, but the gain is unfortunately subsequently offset by other retuning to reach the top‐of‐atmosphere (TOA) energy balance. Increasing vertical resolution also results in a considerable underestimation of high clouds over the Tropical Warm Pool, primarily due to the selection for numerical stability of a higher air parcel launch level in the deep convection scheme. Increasing horizontal resolution from 1° to 0.25° without retuning leads to considerable degradation in cloud and precipitation fields, with much weaker tropical and subtropical short‐ and longwave cloud radiative forcing and much stronger precipitation in the intertropical convergence zone, indicating poor scale‐awareness of the cloud parameterizations. To avoid this degradation, significantly different parameter settings for the low‐resolution (1°) and high‐resolution (0.25°) were required to achieve optimal performance in EAMv1.