Abstract The transition layer in the trades has long been observed and simulated, but the physical processes producing its structure remain little investigated. Using extensive observations from the Elucidating the Role of Clouds–Circulation Coupling in Climate (EUREC 4 A) field campaign, we propose a new conceptual picture of the trade wind transition layer, occurring between the mixed-layer top (around 550 m) and subcloud-layer top (around 700 m). The theory of cloud-free convective boundary layers suggests a transition-layer structure with strong jumps at the mixed-layer top, yet such strong jumps are only observed rarely. Despite cloud-base cloud fraction measured as only 5.3% ± 3.2%, the canonical cloud-free convective boundary layer structure is infrequent and confined to large [ O (200) km] cloud-free areas. We show that the majority of cloud bases form within the transition layer, instead of above it, and that the cloud-top height distribution is bimodal, with a first population of very shallow clouds (tops below 1.3 km) and a second population of deeper clouds (extending to 2–3 km depth). We then show that the life cycle of this first cloud population maintains the transition-layer structure. That is, very shallow clouds smooth vertical thermodynamic gradients in the transition layer by a condensation–evaporation mechanism, which is fully coupled to the mixed layer. Inferences from mixed-layer theory and mixing diagrams, moreover, suggest that the observed transition-layer structure does not affect the rate of entrainment mixing, but rather the properties of the air incorporated into the mixed layer, primarily to enhance its rate of moistening. Significance Statement The physical processes producing the structure of the trade wind transition layer, a thin atmospheric layer thought to be important for regulating convection, are not yet well understood. Using extensive observations from a recent field campaign, we find that the cloud-free convective boundary layer structure, with an abrupt discontinuity in thermodynamic variables, is infrequent, despite cloud-base cloud fraction being small. We show that very shallow clouds both forming and dissipating within the transition layer smooth vertical gradients compared to a jump, except in large [ O (200) km] cloud-free areas. This condensation–evaporation mechanism, which is fully coupled to the mixed layer, does not appear to affect the rate of entrainment mixing, but rather the properties of air incorporated into the mixed layer.