Wood formation was investigated at five heights along the bole for two unrelated trees of Pinus radiata. Both trees showed clear gradients in wood properties from the base to the crown. Cambial cells at the base of the tree were dividing 3.3-fold slower than those at the crown, while the average thickness of cell walls in wood was highest at the base. Cell wall thickness showed an overall correlation coefficient of >0.7 with wood density in both genotypes. Microscopic examination of developing tracheids showed that 33% of cells had formed secondary cell walls at the base of the tree, reducing to 3% at the crown. In total, 455 genes differentially expressed in developing xylem tissue from either the base or the crown were identified using modified differential display. RT-PCR analysis of 156 genes confirmed differential expression for 77%. Of the genes tested, 73% showed gradients in transcript abundance either up or down the bole of the tree, although the steepness of the gradients differed between genes. Genes involved in cell division and expansion tended to be more highly expressed in the crown of the tree, and two putative cell-cycle repressor genes were expressed 2-fold higher at the base. Conversely, transcripts of genes involved in secondary wall thickening were more abundant at the base of the tree. These results suggest that differences in the rate of cambial cell division, differences in the rate and duration of tracheid wall thickening, and differences in gene expression underpin the gradients of wood properties found in pines.