Somatic embryogenesis is a developmental process where a plant somatic cell can dedifferentiate to a totipotent embryonic stem cell that has the ability to give rise to an embryo under appropriate conditions. This new embryo can further develop into a whole plant. In woody plants, somatic embryogenesis plays a critical role in clonal propagation and is a powerful tool for synthetic seed production, germplasm conservation, and cryopreservation. A key step in somatic embryogenesis is the transition of cell fate from a somatic cell to embryo cell. Although somatic embryogenesis has already been widely used in a number of woody species, propagating adult woody plants remains difficult. In this review, we focus on molecular mechanisms of somatic embryogenesis and its practical applications in economic woody plants. Furthermore, we propose a strategy to improve the process of somatic embryogenesis using molecular means.