The terminal (1-year-old) shoot of dormant, 2-year-old balsam fir [Abies balsamea (L.) Mill.] seedlings was either left vertically oriented or tilted to an angle of 60° from the vertical (tilting experiment), or was ringed with N-1-naphthylphthalamic acid (NPA), an inhibitor of indole-3-acetic acid transport, at a concentration of 0, 1 or 10 mg g−1 lanolin (NPA experiment). After 6 weeks of growth, ethylene evolution from the cambial region was measured by gas chromatography – flame ionization detection, and tracheid production and compression wood formation were determined by microscopy. In vertical seedlings of the tilting experiment and in 0 mg g−1-treated seedlings of the NPA experiment, compression wood was not formed and neither ethylene evolution nor tracheid production varied longitudinally or circumferentially within the stem. Tilting induced compression wood formation and increased ethylene evolution and tracheid production on the lower side of the stem, while decreasing tracheid production on the upper side. Compression wood formation was induced and tracheid production and ethylene evolution were stimulated at and above the point where 1 or 10 mg NPA g−1 was applied, whereas below this point compression wood was not formed and tracheid production was inhibited. In both tilting and NPA experiments, there was a positive correlation between ethylene evolution and tracheid production when data from all seedlings were analyzed, but not when data from seedlings forming compression wood were excluded. The results indicate that cambial region ethylene evolution is enhanced when compression wood is being formed, and that the enhancement is related to compression wood formation per se rather than the associated increase in tracheid production.