Clouds are formed in stratosphere of atmosphere.

Explanation

**Step-by-Step Solution:**

1. **Understanding Atmospheric Layers**: The atmosphere is divided into several layers, including the Troposphere, Stratosphere, and Ionosphere. The Troposphere is the lowest layer where most weather phenomena occur.

2. **Identifying the Troposphere**: The Troposphere extends from the Earth's surface up to about 10 km. This layer contains the majority of the atmosphere's gases, including water vapor.

3. **Cloud Formation**: Clouds are formed through the process of condensation of water vapor. Since the Troposphere contains almost all of the atmospheric water vapor, it is the primary layer where clouds form.

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