Xylem transport is essential for the growth, development and survival of vascular plants. Bark wounding may increase the risk of xylem transport failure by tension-driven embolism. However, the consequences of bark wounding for xylem transport are poorly understood. Here, we examined the impacts of the bark wounding on embolism formation, leaf water potential and gas exchange in the terminal branches of two diffuse-porous tree species (Acer platanoides L. and Prunus avium L.). The effects of bark removal were examined on field-grown mature trees exposed to increased evaporative demands on a short-term and longer-term basis (6 h vs 6 days after bark wounding). Bark removal of 30% of branch circumference had a limited effect on the xylem hydraulic conductivity when embolized vessels were typically restricted to the last annual ring near the bark wound. Over the 6-day exposure, the non-conductive xylem area had significantly increased in the xylem tissue underneath the bark wound (from 22–29% to 51–52% of the last annual ring area in the bark wound zone), pointing to gradual yet relatively limited embolism spreading to deeper xylem layers over time. In both species, the bark removal tended to result in a small but non-significant increase in the percent loss of hydraulic conductivity compared with control intact branches 6 days after bark wounding (from 6 to 8–10% in both species). The bark wounding had no significant effects on midday leaf water potential, CO2 assimilation rates, stomatal conductance and water-use efficiency of the leaves of the current-year shoot, possibly due to limited impacts on xylem transport. The results of this study demonstrate that bark wounding induces limited but gradual embolism spreading. However, the impacts of bark wounding may not significantly limit water delivery to distal organs and leaf gas exchange at the scale of several days.