The radial distribution pattern of indole-3-acetic acid (IAA) was determined across the developing tissues of the cambial region in the stem of hybrid aspen (Populus tremula L. x Populus tremuloides Michx). IAA content was measured in consecutive tangential cryo-sections using a microscale mass spectrometry technique. Analysis was performed with wild-type and transgenic trees with an ectopic expression of Agrobacterium tumefaciens IAA-biosynthetic genes. In all tested trees IAA was distributed as a steep concentration gradient across the developing tissues of the cambial region. The peak level of IAA was within the cambial zone, where cell division takes place. Low levels were reached in the region where secondary wall formation was initiated. The transgenic trees displayed a lower peak level and a wider radial gradient of IAA compared with the wild type. This alteration was related to a lower rate of cambial cell division and a longer duration of xylem cell expansion in the transgenic trees, resulting in a decreased xylem production and a larger fiber lumen area. The results indicate that IAA has a role in regulating not only the rate of physiological processes such as cell division, but also the duration of developmental processes such as xylem fiber expansion, suggesting that IAA functions as a morphogen, conveying positional information during xylem development.