Background and Aims: Heartwood plays an important role in maintaining the structural integrity of trees. Although its formation has long been thought to be driven solely by internal ageing processes, more recent hypotheses suggest that heartwood formation acts as a regulator of the tree water balance by modulating the quantity of sapwood. Testing both hypotheses would shed light on the potential ecophysiological nature of heartwood formation, a very common process in trees. Methods: We measured quantities of heartwood and sapwood, xylem conduits and the width and number of growth rings on 406 stems of Pericopsis elata with ages ranging from 2 to 237 years. A subset of 17 trees with similar ages but varying growth rate were sampled in a shaded (slower-growth) site and a sun-exposed (faster-growth) site. We used regression analysis and structural equation modelling to investigate the dynamics and drivers of heartwood formation. Key Results: We found a positive effect of growth rate on the probability of heartwood occurrence, suggesting an earlier heartwood onset in faster-growing stems. After this onset age, heartwood area increased with stem diameter and age. Despite the similar heartwood production per unit stem diameter increment, shaded trees produced heartwood faster than sun-exposed trees. Tree age and hydraulics showed similar direct effects on heartwood and sapwood area of sun-exposed trees, suggesting their mutual role in driving the heartwood dynamics of sun-exposed trees. However, for shaded trees, only tree hydraulics showed a direct effect, suggesting its prominent role over age in driving the heartwood dynamics in limited growing conditions. The positive relationship between growth rate and maximum stomatal conductance supported this conclusion. Conclusions: Heartwood area increases as the tree ages, but at a slower rate in trees where water demand is balanced by a sufficient water supply. Our findings suggest that heartwood formation is not only a struc