The secondary growth of a woody stem requires the formation of a vascular cambium at an appropriate position and proper patterning of the vascular tissues derived from the cambium. Class III homeodomain-leucine zipper (HD ZIP) transcription factors have been implicated in polarity determination and patterning in lateral organs and primary vascular tissues and in the initiation and function of shoot apical meristems. We report here the functional characterization of a Populus class III HD ZIP gene, popREVOLUTA (PRE), that demonstrates another role for class III HD ZIPs in regulating the development of cambia and secondary vascular tissues. PRE is orthologous to Arabidopsis (Arabidopsis thaliana) REVOLUTA and is expressed in both the shoot apical meristem and in the cambial zone and secondary vascular tissues. Transgenic Populus expressing a microRNA-resistant form of PRE presents unstable phenotypic abnormalities affecting both primary and secondary growth. Surprisingly, phenotypic changes include abnormal formation of cambia within cortical parenchyma that can produce secondary vascular tissues in reverse polarity. Genes misexpressed in PRE mutants include transcription factors and auxin-related genes previously implicated in class III HD ZIP functions during primary growth. Together, these results suggest that PRE plays a fundamental role in the initiation of the cambium and in regulating the patterning of secondary vascular tissues.