My PhD thesis investigates the ecological significance of resistance against drought-induced air bubble formation inside the water conduits of plants (embolism), and the plasticity and functional aspects of stem anatomical traits in woody and herbaceous species. I revealed the impact of temperature, precipitation and soil conditions on wood anatomical variation, as well as the effect of plant height on wood trait variation along the main trunk, in tree populations from two seasonally dry environments in Brazil. The functional significance of embolism resistance was confirmed in shrubby and herbaceous species on Tenerife, Canary Islands, where the more embolism resistant species occur in the drier areas. The anatomical characters that best explained differences in embolism resistance across the Tenerife species were thickness of intervessel pit membranes (TPM) and the amount of stem woodiness. In a daisy clade including derived woody island species and their continental herbaceous counterparts, TPM is the direct functional link explaining the indirect positive relationship between increased wood formation and increased embolism resistance. This result matches with an ongoing global study highlighting the frequent occurrence of derived woody species in dry areas worldwide. These combined anatomical and hydraulic results will contribute to our understanding on plant adaptation to drought.