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Background and Aims When the orientation of the stems of conifers departs from the vertical as a result of environmental influences, conifers form compression wood that results in restoration of verticality. It is well known that intercellular spaces are formed between tracheids in compression wood, but the function of these spaces remains to be clarified. In the present study, we evaluated the impact of these spaces in artificially induced compression wood in Chamaecyparis obtusa seedlings. Methods We monitored the presence or absence of liquid in the intercellular spaces of differentiating xylem by cryo-scanning electron microscopy. In addition, we analysed the relationship between intercellular spaces and the hydraulic properties of the compression wood. Key Results Initially, we detected small intercellular spaces with liquid in regions in which the profiles of tracheids were not rounded in transverse surfaces, indicating that the intercellular spaces had originally contained no gases. In the regions where tracheids had formed secondary walls, we found that some intercellular spaces had lost their liquid. Cavitation of intercellular spaces would affect hydraulic conductivity as a consequence of the induction of cavitation in neighbouring tracheids. Conclusions Our observations suggest that cavitation of intercellular spaces is the critical event that affects not only the functions of intercellular spaces but also the hydraulic properties of compression wood. [ABSTRACT FROM AUTHOR]