Trees convert and store the majority of their photosynthetic products in wood which is an essential renewable resource much in demand by human society. Formation of wood follows a process of consecutive cell developmental stages, from vascular cambium proliferation, cell expansion and differentiation, secondary cell wall deposition to programmed cell death, which is controlled by the functionality of complex molecular networks. What are the molecular networks involved in wood formation? How do the molecular networks act in a way to generate wood tissue during tree growth? What are the regulatory modules that lead to the formation of various wood characteristics? The answers to these questions are fundamental to understanding how trees grow, as well as how we can genetically engineer trees with desired properties of wood for human needs. In recent years, a great deal of interest has been invested in the elucidation of wood formation at the molecular level. This review summarizes the current state of understanding of the molecular process that guides wood formation in trees.