This Halacha is an excerpt from our Sefer
Buy me here or on Amazon.com
Seeing the moon-If the moon is covered by clouds may one recite Kiddush Levana?
A. Obligation to benefit from the moon light:
Bedieved: If one said the blessing without seeing the moonlight, and consequently without being able to benefit from it, he must repeat the blessing at another time when the moon shines.
B. If the moon is covered by clouds may one recite Kiddush Levana?
If the moon is covered by clouds, the blessing may only be said if the clouds are thin enough to still be able to benefit from the moonlight, meaning that one is able to recognize [majority of] matters which are recognizable due to moonlight. [If only part of the moon is covered by clouds, the blessing may be said.]
Bedieved: If one said the blessing while the moon was covered to the point that one could not receive benefit from its light, he must repeat the blessing at another time when the moon shines.
C. What should one do if he began the blessing and a cloud then covered the moon?
If one began the blessing with a clear moon and the moon then became covered by clouds, one is to nevertheless continue the blessing. Initially, however, if to begin with one knows the moon will become covered by clouds in middle of the blessing, then he is not to say the blessing [and is rather to wait for a more opportune time]. [Some Poskim however rule that even initially one may say the blessing so long as he begins it within Toch Kdei Dibur of it becoming covered by the cloud. Others however argue on their ruling.]
A sign from heaven:
In a month that one is able to recite Kiddush Levana on Motzei Shabbos it is a good omen from Hashem that the month will be successful. A month that one is unable to recite Kiddush Levana that month due to it being covered by clouds , that month will not be successful.
 Rama 426:1
 So rules M”A 426:1 that its shine must be apparent from the ground, and so rules M”B 426:3 and Shaar Hakolel 33:1; However some Poskim rule that this is not to be taken literally. Rather so long as one can see the moon light and ray of the moon shining, it is valid to say the blessing. [Birkeiy Yosef 426:4, brought in Kaf Hachaim 426:17]
 M”A 426:1 from Radbaz 1:154
 M”A 426:1 from Radbaz 1:154; M”B 426:3; Shaar Hakolel 33:1; See Ashel Avraham Butchach 426
Other opinions and Sephardi custom: Some Poskim rule one is never to say the blessing when the moon is covered even by a thin cloud. [Ben Ish Chaiy Vayikra 23; Chida in Moreh Bietzba 184, brought in Kaf Hachaim 426:18; See Halacha 5 for a story with Reb Hillel Paritcher who waited for there to be no clouds] Practically, so is the custom of the Sephardim. Other Poskim rule one may recite Kiddush Levana even if one cannot benefit from the moonlight due to it being covered by clouds, so long as one can see its figure and outline of the moon. [Daas Torah 426]
 Ashel Avraham Butchach 426
 Leket Yosher p. 70
 Magen Avraham ibid
 M”A 426:1 from Radbaz 1:154; M”B 426:2; Shaar Hakolel 33:1
 Reb Chaim Tzanzer brought in Biur Halacha 426:1 “Vinehnin Meorah”.
 Meaning they allow one to say the blessing even after it has become covered by clouds, so long as one begins the blessing within Toch Kdei Dibbur of the moon becoming covered. Practically, Toch Kidei Dibur is about two seconds and hence the blessing may only be started even according to this opinion within two seconds of the moon becoming covered.
The reason behind their allowance: This opinion views this blessing similar to all other blessings said over sights [such as lightning] in which the ruling is it must only be seen at the moment of the blessing.
 Mishneh Berurah in Biur Halacha 426:1 “Vinehnin Meorah
 Magid Meisharim Shir Hashirim, brought in M”A 426:2