The development of heartwood (HW) and the associated accumulation of secondary metabolites, which are also known as 'specialized metabolites' or 'extractives', is an important feature of tree biology. Heartwood development can affect tree health with broader implications for forest health. Heartwood development also defines a variety of wood quality traits that are important in the forest industry such as durability and colour of wood products. In the bioproducts industry, HW provides a source of high-value small molecules such as fragrances and antimicrobials. The HW properties of decay resistance in living trees, durability and colour of wood products, and small molecule bioproducts are largely defined by secondary metabolites, the biosynthesis of which appears to be activated during the onset of HW formation. Traditionally, it is thought that HW formation involves a spike in the activity of secondary metabolism in parenchyma cells in a transition zone between sapwood and HW, followed by programmed cell-death. The resulting HW tissue is thought to consist entirely of dead cells. Here, we discuss a variation of existing models of HW formation, based on the recent discovery of HW-specific transcriptome signatures of terpenoid biosynthesis in sandalwood (Santalum album L.) that invokes the activity of living cells in HW.