Study of natural variation is an efficient method to elucidate how plants adapt to local climatic conditions, a key process for the evolution of a species. However, it is challenging to determine the genetic basis of adaptive variation especially in forest trees which have large and complex genomes. Norway spruce is a shade tolerant conifer in which the requirement of far-red light for growth increases latitudinally northwards. In the current work, hypocotyl-length followed a latitudinal cline in response to SHADE (low red:far-red ratio). RNA-sequencing revealed differential gene expression in response to SHADE, between a southern and a northern natural population in Sweden. Exome capture included analysis of uniquely large data set (1654 trees) that revealed missense variations in coding regions of nine differentially expressed candidate genes, which followed a latitudinal cline in allele and genotype frequencies. These genes included five transcription factors involved in vital processes like bud-set/bud-flush, lignin pathway and cold acclimation, and other genes that take part in cell-wall remodeling, secondary cell-wall thickening, response to starvation and immunity. Findings from this work primarily suggests that the northern populations of Norway spruce are better adapted towards disease resistance under shade by up-regulation of lignin pathway that is linked to immunity and it forms concrete basis for local adaptation to light quality in Norway spruce, one of the most economically important conifer tree species in Sweden.