It is known that stem CO2 efflux differs somewhat both temporally and spatially from actual stem respiration, but relations between these two are not fully understood. A physical model of CO2 diffusion and advection by xylem sap flow is developed to interpret the CO2 flux signal from the stem. Model predictions are compared against measured CO2 efflux data from a field-grown 16-m Pinus sylvestris L. tree. The ratio of CO2 efflux to CO2 production is predicted to be much larger in the upper part of the tree than in the lower part as the xylem sap carries the respired CO2 upwards. The model also predicts the temperature dependency of real respiration to be higher than that of the CO2 efflux due to the slowness of diffusion. The relation between stem respiration and CO2 efflux depends strongly on the sap flow rate, radial diffusion resistance and stem geometry and size. The model may be used to scale individual CO2 efflux measurements to evaluate the respiration rate of whole trees and forests.