In modern horticulture, growers are searching for reliable biosensors and diagnostic tools to evaluate plant eco-physiological behaviour in order to optimize plant growth and crop development. One of these biosensors is the linear variable displacement transducer (LVDT) which accurately measures stem diameter variations. The variations of stem diameter reflect the combination of two main phenomena: irreversible radial stem growth and daily shrinkage and swelling of the elastic stem cells due to changes in internally stored water. A correct interpretation of the composite LVDT-signal, with respect to its practical application, requires an unambiguous distinction between these two components of the signal. This paper describes a comprehensive model for stem diameter variations which includes a mechanistic description of radial stem growth and elastic stem diameter changes related to changes in internally stored water. Using the results of a two-year-old beech tree (Fagus sylvatica), the practical application of the model is illustrated with measured LVDT-signals where radial stem growth and elastic changes of the stem could be distinguished. As this approach is also applicable to other ornamental or vegetable crops, the model can be considered as a very powerful tool for interpretation of the composite and complex origin of the variations in stem diameter as is observed with LVDTs.