It is noteworthy that the largest part of global vegetation biomass depends on a thin layer of cells: the vascular cambium. Understanding the wood formation processes and relationships with environmental factors is a crucial and timely research question requiring interdisciplinary efforts, also to upscale the information gained and to evaluate implications for tree growth and forest productivity. We provide an overview of wood formation processes up to tree-ring development, bearing in mind that the combined action of intrinsic factors and environmental drivers determines the anatomical traits of a tree ring formed at a specific time and position within the tree’s architecture. After briefly reviewing intrinsic factors, we focus attention on environmental drivers highlighting how a correct interpretation of environmental signals in tree rings must be grounded in a deep knowledge of xylogenesis and consequent wood anatomical traits. We provide guidelines on novel methods and approaches recently developed to study xylem formation. We refer to existing literature on established techniques for retrospective analyses in tree-ring series of anatomical and isotopic traits, to assess long-term ecophysiological responses to environmental variations, also giving advice on possible bias because of interand within-tree variability. Finally, we highlight that, once the temporal axis of intra-annual tree-ring variability of xylem traits is established by xylogenesis analysis, a multidisciplinary approach linking classical dendro-ecology, wood functional traits (dendro-anatomy) and eco-physiology (here focusing on dendro-isotopes) allows a better interpretation of past environmental events hidden in tree rings, and more reliable forecasts of wood growth in response to climate change.