Secondary growth relies on precise and specialized transcriptional networks that determine cell division, differentiation, and maturation of xylem cells. We identified a novel role for the ethylene-induced Populus Ethylene Response Factor PtERF85 (Potri.015G023200) in balancing xylem cell expansion and secondary cell wall (SCW) formation in hybrid aspen (Populus tremula x tremuloides). Expression of PtERF85 is high in phloem and cambium cells and during the expansion of xylem cells, while it is low in maturing xylem tissue. Extending PtERF85 expression into SCW forming zones of woody tissues through ectopic expression reduced wood density and SCW thickness of xylem fibers but increased fiber diameter. Xylem transcriptomes from the transgenic trees revealed transcriptional induction of genes involved in cell expansion, translation, and growth. The expression of genes associated with plant vascular development and the biosynthesis of SCW chemical components such as xylan and lignin, was down-regulated in the transgenic trees. Our results suggest that PtERF85 activates genes related to xylem cell expansion, while preventing transcriptional activation of genes related to SCW formation. The importance of precise spatial expression of PtERF85 during wood development together with the observed phenotypes in response to ectopic PtERF85 expression suggests that PtERF85 contributes to the transition of fiber cells from elongation to secondary cell wall deposition.