Cloud contamination can lead to significant biases in sea surface temperature (SST) as estimated from satellite measurements. The effectiveness of four cloud detection algorithms for the Moderate Resolution Imaging Spectroradiometer (MODIS) in retaining valid SST data and masking cloud-contaminated data was assessed for all 2125 daytime and nighttime images during 2010 over the eastern Gulf of Mexico and including the east coast of Florida. None of the cloud detection algorithms was found to be sufficient to reliably differentiate clouds from valid SST, particularly during anomalously cold events. The strengths and weaknesses of each algorithm were identified, and a new hybrid cloud detection algorithm was developed to maximize valid data retention while excluding cloud-contaminated pixels. The hybrid algorithm was based on a decision tree, which includes a set of rules to use existing algorithms in different ways according to time and location. Comparing with >10000 concurrent in situ SST measurements from buoys, images processed with the hybrid algorithm showed increases in data capture and improved accuracy statistics over most existing algorithms. In particular, while keeping the same accuracy, the hybrid algorithm resulted in nearly 20% more SST retrievals than the most accurate algorithm (Quality SST) currently being used for operational processing. The increases in both data coverage and SST range should improve MODIS data products for more reliable SST retrievals in near real time, thus enhancing the ocean observing capacity to detect anomaly events and study short- and long-term SST changes in coastal environments.