Efforts to develop mechanistic tree growth models are hindered by the uncertainty on whether and when tree growth responses to environmental factors are driven by carbon assimilation or by biophysical limitations of wood formation. In this study, we use multiannual weekly wood‐formation monitoring of two conifer species (Larix decidua and Picea abies) along a 900 m elevational gradient in the Swiss Alps to assess the biophysical effect of temperature and water potential on wood formation. To this end we developed a model that simulates the effect of water potential on turgor‐driven cambial division, modulated by the effect of temperature on enzymatic activity. The model reproduced the observed phenology of tracheid production, as well as intra‐ and inter‐annual tracheid production dynamics of both species along the elevational gradient, although inter‐annual model performance was lower. We found that temperature alone explains the onset of tracheid production, yet water potential appears necessary to predict the ending and the total amount of tracheids produced annually. We conclude that intra‐annual cambial activity is strongly constrained by both temperature and water potential at all elevations, independently of carbon assimilation. At the inter‐annual scale, biophysical constraints likely interact with other factors.