Currently, one of the largest uncertainties in climate forcing studies is the effect of aerosols on the earth-atmosphere system. Aerosols affect the radiation budget under both clear and cloudy skies, referred to as the aerosol direct and semi-direct effect, and can modify cloud microphysical-radiative properties and cloud life-time, referred to as the aerosol indirect effect (AIE). In this talk I shall briefly describe present efforts that are being used to evaluate this aerosol effect on climate. We use the Goddard Institute for Space Studies (GISS) general circulation model (GCM) coupled to an online sulfur chemistry model and source models for organic matter, black carbon and sea salt to estimate the direct and the indirect aerosol effects. We test the sensitivity of our results to cloud parameterization assumptions that control the vertical distribution of cloud occurrence, the auto-conversion rate, and the aerosol scavenging rate, each of which feeds back significantly on the model aerosol burden. Satellite diagnostics of cloud properties, column droplet concentration, cloud droplet effective radii, cloud optical depth and column cloud susceptibility, are used to evaluate similar parameters from the model to constrain the AIE. Although the black carbon effect has not been included in our present AIE simulations, we treat the effect of carbonaceous inclusions in cloud droplets through off-line simulations. To evaluate the effect of black carbon aerosols on regional climate we have conducted climate simulations that use realistic aerosol distributions over China, India and the Indian Ocean regions where aerosol emissions are increasing at an alarming rate. Model simulations are able to reproduce trends in precipitation observed over China: North drought, South flooding, considered to be the largest observed in several decades. In addition surface temperature changes and changes in radiative fluxes over both India and China are also comparable to measurements. The above results are only obtained when the aerosol is treated as an absorbing aerosol. Our results suggest that black carbon aerosols can have a significant influence on regional climate through changes in the hydrological cycle and large-scale circulation.