Two conditions are required for cloud formation:cooling of the air and

Presence of water molecules

Explanation:

Temperature decreases with an increase in altitude. At sufficiently high altitudes, the air is much colder than the air on the surface of the Earth. Water vapor has a low density and is capable to rise until it gets into a medium with a significantly low temperature and pressure to condense and produce water droplets out of water vapor. Those droplets then form clouds.