Earth’s climate sensitivity has long been subject to heated debate and has spurred renewed interest after the latest IPCC assessment report suggested a downward adjustment of its most likely range. Recent observational studies have produced estimates of transient climate sensitivity, that is, the global mean surface temperature increase at the time of CO2 doubling, as low as 1.3 K (refs ,), well below the best estimate produced by global climate models (1.8 K). Here, we present an observation-based study of the time period 1964 to 2010, which does not rely on climate models. The method incorporates observations of greenhouse gas concentrations, temperature and radiation from approximately 1,300 surface sites into an energy balance framework. Statistical methods commonly applied to economic time series are then used to decompose observed temperature trends into components attributable to changes in greenhouse gas concentrations and surface radiation. We find that surface radiation trends, which have been largely explained by changes in atmospheric aerosol loading, caused a cooling that masked approximately one-third of the continental warming due to increasing greenhouse gas concentrations over the past half-century. In consequence, the method yields a higher transient climate sensitivity (2.0 +/- 0.8 K) than other observational studies.