The high altitude spruce–fir (Abies fraseri (Pursh) Poiret.–Picea rubens Sarg.) forests of the southern Appalachian Mountains, USA, experience frequent cloud immersion. Recent studies indicate that cloud bases may have risen over the past 30 years, resulting in less frequent forest cloud immersion, and that further increases in cloud base height are likely in the event of continued climate warming. To assess the impact of this trend on the regeneration of high altitude spruce–fir forests and the migration of plant communities, in particular the encroachment of spruce–fir forests and Rhododendron catawbiense Michx. islands into adjacent grass bald communities, we investigated effects of cloud immersion on photosynthetic parameters of seedlings of Abies fraseri and R. catawbiense in a grass bald site and A. fraseri in a forest understory. Although photosynthetic photon flux was 4.2 to 19.4-fold greater during clear conditions, cloud immersion had no effect on photosynthesis in A. fraseri at either site, whereas it reduced photosynthesis of R. catawbiense by about 40%. However, cloud immersion increased mean leaf fluorescence by 7.1 to 12.8% in both species at both sites. Cloud immersion increased mean relative humidity from 65 to 96%, reduced transpiration by 95% and reduced mean leaf-to-air temperature difference from 6.6 to 0.5 °C.