Thermal frequency fluctuations in optical cavities limit the sensitivity of precision experiments ranging from gravitational wave observatories to optical atomic clocks. Conventional modeling of these noises assumes a linear response of the optical field to the fluctuations of cavity frequency. Fundamentally, however, this response is nonlinear. Here we show that nonlinearly transduced thermal fluctuations of cavity frequency can dominate the broadband noise in photodetection, even when the magnitude of fluctuations is much smaller than the cavity linewidth. We term this noise "thermal intermodulation noise" and show that for a resonant laser probe it manifests as intensity fluctuations. We report and characterize thermal intermodulation noise in an optomechanical cavity, where the frequency fluctuations are caused by mechanical Brownian motion, and find excellent agreement with our developed theoretical model. We demonstrate that the effect is particularly relevant to quantum optomechanics: using a phononic crystal Si3N4 membrane with a low-mass, soft-clamped mechanical mode, we are able to operate in the regime where measurement quantum backaction contributes as much force noise as the thermal environment does. However, in the presence of intermodulation noise, quantum signatures of measurement are not revealed in direct photodetection. The reported noise mechanism, while studied for an optomechanical system, can exist in any optical cavity. (C) 2020 Optical Society of America under the terms of the OSA Open Access Publishing Agreement