Analysis of the oxygen isotope ratio of tree-ring cellulose is a valuable tool that can be used as a paleoclimate proxy. Our ability to use this tool has gone through different phases. The first began in the 1970s with the demonstration of empirical relationships between the oxygen isotope ratio of tree-ring cellulose and climate. These empirical relationships, however, did not provide us with the confidence that they are robust through time, across taxa and across geographical locations. The second phase began with a rudimentary understanding of the physiological and biochemical mechanisms responsible for the oxygen isotope ratios of cellulose, which is necessary to increase the power of this tool. This phase culminated in a mechanistic tree-ring model integrating concepts of physiology and biochemistry in a whole-plant system. This model made several assumptions about leaf water isotopic enrichment and biochemistry which, in the nascent third phase, are now being challenged, with surprising results. These third-phase results suggest that, contrary to the model assumption, leaf temperature across a large latitudinal gradient is remarkably constant and does not follow ambient temperature. Recent findings also indicate that the biochemistry responsible for the incorporation of the cellulose oxygen isotopic signature is not as simple as has been assumed. Interestingly, the results of these challenges have strengthened the tree-ring model. There are several other assumptions that can be investigated which will improve the utility of the tree-ring model.