Drought is a recurrent stress to forests, causing periodic forest mortality with enormous economic and environmental costs. Wood is the water‐conducting tissue of tree stems, and trees modify wood development to create anatomical features and hydraulic properties that can mitigate drought stress. This modification of wood development can be seen in tree rings where not only the amount of wood but also the morphology of the water‐conducting cells are modified in response to environmental conditions. This review provides an overview of how trees conduct water, and
how trees modify wood development to affect water conduction properties in response to drought. It also discusses key needs for new research, and how new knowledge of wood formation can play a role in the conservation of forests under threat by climate change.