Abstract This study examines the sensitivity of the retrieved cloud droplet radii (CDR) to the vertical inhomogeneity of droplet radii, including the existence of a drizzle mode in clouds. The focus of this study is warm water-phase clouds. Radiative transfer simulations of three near-infrared Moderate Resolution Imaging Spectroradiometer (MODIS) channels centered on wavelengths of 1.6, 2.1, and 3.7 μm reveal that the retrieved CDR are strongly influenced by the vertical inhomogeneity of droplet size including (i) the existence of small cloud droplets at the cloud top and (ii) the existence of the drizzle mode. The influence of smaller droplets at cloud top affects the 3.7-μm channel most, whereas the presence of drizzle influences radiances of both the 2.1- and 1.6-μm channels more than the 3.7-μm channel. Differences in the CDR obtained from MODIS 1.6-, 2.1-, and 3.7-μm channels that appear in global analysis of MODIS retrievals and the CDR derived from data collected during the First International Satellite Cloud Climatology Project (ISCCP) Regional Experiment (FIRE) intensive observation period in 1987 can be explained by the results obtained from the sensitivity experiments of this study.