Further differentiation of cambial cells results in the formation of vascular tissues, which are involved mainly in longitudinal transport of liquids and solutes up and down the plant stem. This is facilitated by the creation of long, unbroken tubular structures. Vascular tissue is made up of two distinct elements, xylem and phloem, with xylem being involved in the transport of water, soil derived nutrients and plant hormones from the roots up to the shoots, and phloem in the transport of organic material such as photosynthetic products, proteins, hormones and other regulatory molecules from the leaves to the roots. During secondary growth, these tissues, in particular xylem, are also involved in providing mechanical strength to the stem and as a storage sink for metabolites produced in other parts of the plant. Production of these conduits from the cambium is polarised with xylem derivatives produced centripetally (toward the inside of the meristematic layer) and phloem derivatives centrifugally (toward the outside of the meristematic layer).

Secondary vascular tissue, produced by fusiform initials in the cambium consists of axially aligned tracheary elements (fibres, tracheids, vessels) involved in xylem transport and axially aligned sieve elements (sieve tube cells, companion cells) involved in phloem transport. Ray and axial parenchyma cells are also products of meristematic activity in the cambium and occur in both xylem and phloem tissues. Ray parenchyma cells are aligned radially and axial parenchyma cells are aligned longitudinally. Both parenchyma tissues are involved in transport and storage.

In angiosperms longitudinal transport in the xylem occurs in vessels, which are specialised for liquid transport and arranged end on end to form a continuous, longitudinally aligned tube system. Vessel elements exhibit tapered end walls and thickened lignified cell walls. Prior to maturation and becoming functional, vessel elements undergo programmed cell death (PCD), a process during which cellular content is actively removed, which together with specialised end structures known as perforation plates allows for unimpeded flow between individual vessel elements. Vessels do not form completely straight parallel tubes but rather deviate from their axial path slightly to come in contact with other vessels creating a network of interconnected tubes that allow for movement between vessels through cell wall pits.Vessels are surrounded by longitudinally aligned fibre cells which have a role in providing strength to the plant stem. Compared to vessels, fibres are longer and narrower, have thicker, usually more heavily lignified cell walls, increased tapering of their end walls and they lack a perforation plate. Fibres also undergo PCD as they mature and contain simple pits on their cell walls that allow for minimal transport of liquids between adjacent fibres. Fibres are found most frequently in the xylem and, to a lesser extent, in the phloem where they are arranged in small bundles. In gymnosperms, both transport and strength are provided by a single xylary cell type, tracheids, which, in terms of morphology, are an intermediate form between a fibre and a vessel element. Tracheids are also found in angiosperm stems but to a much lesser degree. Transport of liquids between tracheids is via specialised cell wall openings called bordered pits which through passive opening or closing via acentral, thickened area of pit membrane (torus)can prevent gas or water movement (for example to prevent possible embolism).

Parenchyma cells are rectangular to almost isodiametric in shape and alive at maturity. They are involved in a variety of roles such as transport, signaling, storage and wound responses. Walls of parenchyma cells have a characteristically high number of plasmodesmata that allow for efficient cell to cell communication and transport. Ray parenchyma cells are the only cells within a tree stem that are aligned radially and play an important role in transport and communication between xylem derivatives, cambial initials and phloem derivatives. Similarly, axial parenchyma cells are the only live cells aligned longitudinally in the xylem. They are important for storage and transport in this direction while in the phloem they more often fulfill a storage function.

In the phloem, longitudinal transport occurs via sieve tube elements, which like vessels, are aligned end to end and form continuous tubes. Individual elements are connected by structures called sieve plates. Sieve tube elements undergo some elongation and cell wall thickening during differentiation but differ from vessels and fibres as they do not undergo lignification. Also sieve tube elements are alive at maturity and have adapted a highly modified cytoplasm to allow for free movement of solutes between cells. Here, so called P-proteins internally line all sieve tubes and in the event of wounding can seal sieve plates and allow for wound closure. Cytoplasmic modifications occur via the removal of large organelles including the nucleus, ribosomes, golgi bodies, the tonoplast (vacuoles) and a cytoskeleton as well as links of plasma membranes between longitudinally aligned cells. Sieve tube elements form an association with companion cells, which in angiosperms are derived from a single division of a sieve tube element during differentiation while in gymnosperms they are derived from separate lineages. Companion cells are believed to produce and secrete information molecules via plasmodesmata to associated sieve tube elements.

The most prominent cell division type in the cambial zone, making up approximately 90% of divisions in the cambial zone, is periclinal or additive division, which leads to the formation of highly organised files of radially aligned cells. Unlike in most cell divisions in plants where the cell plate forms across the shortest distance of the cell, cells undergoing periclinal division in the cambium have a cell plate that forms across its long axis. In this process the cell plate begins formation around the mid point of the cell and develops longitudinally until it connects with two lateral cell walls at the end of a cell, resulting in the formation of two nearly identically sized daughter cells. Anticlinal divisions or multiplicative divisions do not occur as frequently as periclinal divisions and are responsible for the formation of new radial files within the cambial zone capable of further periclinal divisions. Anticlinal divisions account for the increasing stem circumference as a result of radial growth as cell wall expansion of initials and their derivatives is not sufficient to compensate for this. This results in a higher frequency of anticlinal divisions during times of accelerated plant growth. The number of anticlinal divisions occurring in fusiform initials is often higher than the number required to compensate for an increase in stem circumference. Superfluous cells are either lost or squeezed out from the cambial zone or undergo trans-differentiation to form ray initials.