We present a mechanistic model of wood tissue development in response to changes in competition, management and climate. The model is based on a refinement of the pipe theory, where the constant ratio between sapwood and leaf area (pipe theory) is replaced by a ratio between pipe conductivity and leaf area. Simulated pipe conductivity changes with age, stand density and climate in response to changes in allocation or pipe radius, or both. The central equation of the model, which calculates the ratio of carbon (C) allocated to leaves and pipes, can be parameterized to describe the contrasting stem conductivity behavior of different tree species: from constant stem conductivity (functional homeostasis hypothesis) to height-related reduction in stem conductivity with age (hydraulic limitation hypothesis). The model simulates the daily growth of pipes (vessels or tracheids), fibers and parenchyma as well as vessel size and simulates the wood density profile and the earlywood to latewood ratio from these data. Initial runs indicate the model yields realistic seasonal changes in pipe radius (decreasing pipe radius from spring to autumn) and wood density, as well as realistic differences associated with the competitive status of trees (denser wood in suppressed trees).