This study provides comprehensive insight into the notable differences in clouds and precipitation simulated by the Energy Exascale Earth System Model Atmosphere Model version 0 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 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. This lack of stratocumulus clouds 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 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. Plain Language Summary The Energy Exascale Earth System Model (E3SM) is a new and ongoing U.S. Department of Energy (DOE) climate modeling effort to develop a high‐resolution Earth system model specifically targeting next‐generation DOE supercomputers to meet the science needs of the nation and the mission needs of DOE. The increase of model resolution along with improvements in representing cloud and convective processes in the E3SM atmosphere model version 1 has led to quite significant model behavior changes from its earlier version, particularly in simulated clouds and precipitation. To understand what causes the model behavior changes, this study conducts sensitivity experiments to isolate the impact of changes in model physics, resolution, and parameter choices on these changes. Results from these sensitivity tests and discussions on the underlying physical processes provide substantial insight into the model errors and guidance for future E3SM development. Key Points CLUBB along with the companion changes in EAMv1 primarily account for the overall improvements in clouds and precipitation simulation Underestimate of coastal Sc in EAMv1 is due to CLUBB and model tuning; increased vertical resolution partially offsets this degradation The poor scale awareness of EAMv1 requires retuning as resolution increases, which has a large impact on model cloud behavior