ABSTRACT Optical photometry and spectra of the luminous type IIn supernova SN 2008iy are analysed in detail with implications for cosmic ray acceleration and the radio emission. The light curve and expansion velocities indicate ejecta with the kinetic energy of 3 × 1051 erg to collide with the ∼10 M⊙ circumstellar envelope. The luminous H α is explained as originated primarily from circumstellar clouds interacting with the forward shock. For the first time the fluorescent O i 8446 Å emission is used to demonstrate that the cloud fragmentation cascade spans a scale range >2.3 dex. The narrow circumstellar H α permitted us to estimate the acceleration efficiency of cosmic rays. The found value is close to the efficiency inferred in the same way for other two SNe IIn, SN 1997eg and SN 2002ic. The efficiency of cosmic ray acceleration is utilized to reproduce the radio flux from SN 2008iy for the amplified magnetic field consistent with the saturated turbulent magnetic field in the diffusive shock acceleration mechanism.