Wood (secondary xylem) is one of the most important sustainable energy sources for humans. Arabidopsis, despite its herbaceous nature, has become an excellent model to study wood formation. Recent progress has shown that conserved molecular mechanisms may exist in herbaceous plants and trees during vascular development and wood formation. Several transcription factor families and plant hormone species as well as other factors contribute to the regulation of xylem development in both Arabidopsis and woody plants. In this review, we highlight how information gained from the analysis of vascular development in Arabidopsis has improved our understanding of wood formation in trees.