An empirical flow-dependent adaptive observation error inflation (AOEI) method is proposed for assimilating all-sky satellite brightness temperatures through observing system simulation experiments with an ensemble Kalman filter. The AOEI method adaptively inflates the observation error when the absolute difference (innovation) between the observed and simulated brightness temperatures is greater than the square root of the combined variance of the uninflated observational error variance and ensemble-estimated background error variance. This adaptive method is designed to limit erroneous analysis increments where there are large representativeness errors, as is often the case for cloudy-affected radiances, even if the forecast model and the observation operator (the radiative transfer model) are perfect. The promising performance of this newly proposed AOEI method is demonstrated through observing system simulation experiments assimilating all-sky brightness temperatures from GOES-R (now GOES-16) in comparison with experiments using an alternative empirical observation error inflation method proposed by Geer and Bauer. It is found that both inflation methods perform similarly in the accuracy of the analysis and in the containment of potential representativeness errors; both outperform experiments using a constant observation error without inflation. Besides being easier to implement, the empirical AOEI method proposed here also shows some advantage over the Geer–Bauer method in better updating variables at large scales. Large representative errors are likely to be compounded by unavoidable uncertainties in the forecast system and/or nonlinear observation operator (as for the radiative transfer model), in particular in the areas of moist processes, as will be the case for real-data cloudy radiances, which will be further investigated in future studies.