Auxin plays a pivotal role in various plant growth and development processes, including vascular differentiation.The modulation of auxin responsiveness through the auxin perception and signaling machinery is believed to be a major regulatory mechanism controlling cambium activity and wood formation. To gain more insights into the rolesof key Aux/IAA gene regulators of the auxin response in these processes, we identified and characterized membersof the Aux/IAA family in the genome of Eucalyptus grandis, a tree of worldwide economic importance. We found that the gene family in Eucalyptus is slightly smaller than that in Populus and Arabidopsis, but all phylogenetic groupsare represented. High-throughput expression profiling of different organs and tissues highlighted several Aux/IAAgenes expressed in vascular cambium and/or developing xylem, some showing differential expression in response todevelopmental (juvenile vs. mature) and/or to environmental (tension stress) cues. Based on the expression profiles,we selected a promising candidate gene, EgrIAA4, for functional characterization. We showed that EgrIAA4 protein is localized in the nucleus and functions as an auxin-responsive repressor. Overexpressing a stabilized version of EgrIAA4 in Arabidopsis dramatically impeded plant growth and fertility and induced auxin-insensitive phenotypes such as inhibition of primary root elongation, lateral root emergence and agravitropism. Interestingly, the lignified secondary walls of the interfascicular fibers appeared very late, whereas those of the xylary fibers were virtually undetectable, suggesting that EgrIAA4 may play crucial roles in fiber development and secondary cell wall deposition.