In many trees, a short photoperiod (SD) triggers substantial physiological adjustments necessary for over-wintering. We have used transgenic ethylene-insensitive birches (Betula pendula), which express the Arabidopsis ethylene receptor gene ETR1 carrying the dominant mutation etr1-1, to investigate the role of ethylene in SD-induced responses in the shoot apical meristem (SAM). Under SD, the ethylene-insensitive trees ceased elongation growth comparably to the wild-type. In contrast, the formation of terminal buds, which in trees is typically induced by SD, was abolished. However, although delayed, endo-dormancy did eventually develop in the ethylene-insensitive trees. This, together with the rapid resumption of growth in the ethylene-insensitive trees after transfer from non-permissive to permissive conditions suggests that ethylene facilitates the SD-induced terminal bud formation, as well as growth arrest. In addition, apical buds of the ethylene-insensitive birch did not accumulate abscisic acid (ABA) under SD, suggesting interaction between ethylene and ABA signalling in the bud. Alterations in SAM functioning were further exemplified by reduced apical dominance and early flowering in ethylene-insensitive birches. Gene expression analysis of shoot apices revealed that the ethylene-insensitive birch lacked the marked increase in expression of a beta-xylosidase gene typical to the SD-exposed wild-type. The ethylene-dependent beta-xylosidase gene expression is hypothesized to relate to modification of cell walls in terminal buds during SD-induced growth cessation. Our results suggest that ethylene is involved in terminal bud formation and in the timely suppression of SAM activity, not only in the shoot apex, but also in axillary and reproductive meristems.