Inversion of radio occultation (RO) measurements to atmospheric parameters in the neutral atmosphere utilizes the assumption of spherical symmetry by implementation of the Abel transform. The main contribution to the retrieved refractional angle and other geophysical parameters comes from gaseous properties of the atmosphere. The atmospheric refraction is expressed by a function of air pressure, air temperature, and water vapor pressure. Such commonly adopted methodology results in highly comparable RO retrievals with background models. However, in the lowermost troposphere referred to as planetary boundary layer, inversion in spherically symmetric atmosphere is an ill‐conditioned problem. The presence of superrefractions introduces negative errors in the RO‐retrieved refractivity (N‐bias). We show that significant refractivity gradients are frequently collocated with clouds over oceans in tropical and subtropical regions. Based on gridded monthly means we show that superrefractions usually occur at altitudes up to 2 km and the largest cloud fractions tend to suspend at underlying layers. The magnitude of clouds expressed in terms of refractivity units can exceed 1.5, which corresponds to 0.5% in terms of fractional differences. We use both geometrical optics and wave optics techniques to illustrate propagation mechanisms in RO retrievals. Simulation experiments suggest that RO inversions in cloudy planetary boundary layer lead to larger negative N‐biases. Low‐level clouds retrieved from numerical weather prediction model could therefore be used as an indicator of erroneous RO observations. A better agreement with RO refractivity could be achieved by incorporating cloud variables into background fields especially over the Pacific and Atlantic Oceans.