We model the OH megamaser emission from the luminous infrared galaxy IIIZw35 as arising from a narrow rotating starburst ring of radius 22 pc enclosing a mass of 7×106M⊙. We show how both the compact and apparently diffuse maser emission from this ring can arise from a single phase of unsaturated maser clouds amplifying background radio continuum. The masering clouds are estimated to have a diameter of <0.7 pc and internal velocity dispersion of ∽20 kms−1. We find that the clouds are neither self-gravitating nor pressure confined, and they could be magnetically confined or freely expanding. Their dispersal lifetimes may set the vertical thickness of the ring. For an estimated internal density of 3×103cm−3, cloud masses are of order 24 M⊙. The observed spectral features and velocity gradients indicate that the clouds must be outflowing and escaping the nucleus. The cloud mass outflow rate is estimated to be 0.8 M⊙yr−1, while the star formation rate is ∽19 M⊙yr−1. Associated ionised gas, possibly generated from dissipated clouds, provides free-free absorption along the source axis, explaining the observed East-West asymmetries. We show that the clumpiness of a maser medium can have a dramatic effect on what is observed even in a relatively low gain OH megamaser. Specifically, in IIIZw35 our clumpy maser model naturally explains the large line to continuum ratios, the large 1667MHz:1665MHz line ratios and the wide velocity dispersions seen in the compact maser spots. Other astrophysical masers showing both compact and apparently diffuse emission might be explained by similar clumpy structures.