The structure and evolution of the atmospheric boundary layer (ABL) under clear-sky fair weather conditions over mountainous terrain is dominated by the diurnal cycle of the surface energy balance and thus strongly depends on surface snow cover. We use data from three passive ground-based infrared spectrometers deployed in the East River Valley in Colorado’s Rocky Mountains to investigate the response of the thermal ABL structure to changes in surface energy balance during the seasonal transition from snow-free to snow-covered ground. Temperature profiles were retrieved from the infrared radiances using the optimal estimation physical retrieval TROPoe. A nocturnal surface inversion formed in the valley during clear-sky days, which was subsequently mixed out during daytime with the development of a convective boundary layer during snow-free periods. When the ground was snow covered, a very shallow convective boundary layer formed, above which the inversion persisted through the daytime hours. We compare these observations to NOAA’s operational High-Resolution-Rapid-Refresh (HRRR) model and find large warm biases on clear-sky days resulting from the model’s inability to form strong nocturnal inversions and to maintain the stable stratification in the valley during daytime when there was snow on the ground. A possible explanation for these model shortcomings is the influence of the model’s relatively coarse horizontal grid spacing (3 km) and its impact on the model’s ability to represent well-developed thermally driven flows, specifically nighttime drainage flows.