We studied xylem anatomy and hydraulic architecture in 14 transgenic insertion events and a control line of hybrid poplar (Populus spp.) that varied in lignin content. Transgenic events had different levels of down-regulation of two genes encoding 4-coumarate:coenzyme A ligase (4CL). Two-year-old trees were characterized after growing either as free-standing trees in the field or as supported by stakes in a greenhouse. In free-standing trees, a 20 to 40% reduction in lignin content was associated with increased xylem vulnerability to embolism, shoot dieback and mortality. In staked trees, the decreased biomechanical demands on the xylem was associated with increases in the leaf area to sapwood area ratio and wood specific conductivity (ks), and with decreased leaf-specific conductivity (kl). These shifts in hydraulic architecture suggest that the bending stresses perceived during growth can affect traits important for xylem water transport. Severe 4CL-downregulation resulted in the patchy formation of discoloured, brown wood with irregular vessels in which water transport was strongly impeded. These severely 4CL-downregulated trees had significantly lower growth efficiency (biomass/leaf area). These results underscore the necessity of adequate lignification for mechanical support of the stem, water transport, tree growth and survival.