During the growing season, trees allocate photoassimilates to increase their aboveground woody biomass in the stem (ABIstem). This ‘carbon allocation’ to structural growth is a dynamic process influenced by internal and external (e.g., climatic) drivers. While radial variability in wood formation and its resulting structure have been intensively studied, their variability along tree stems and subsequent impacts on ABIstem remain poorly understood. We collected wood cores from mature trees within a fixed plot in a well-studied temperate Fagus sylvatica L. forest. For a subset of trees, we performed regular interval sampling along the stem to elucidate axial variability in ring width (RW) and wood density (ρ), and the resulting effects on tree- and plot-level ABIstem. Moreover, we measured wood anatomical traits to understand the anatomical basis of ρ and the coupling between changes in RW and ρ during drought. We found no significant axial variability in ρ because an increase in the vessel-to-fiber ratio with smaller RW compensated for vessel tapering towards the apex. By contrast, temporal variability in RW varied significantly along the stem axis, depending on the growing conditions. Drought caused a more severe growth decrease, and wetter summers caused a disproportionate growth increase at the stem base compared with the top. Discarding this axial variability resulted in a significant overestimation of tree-level ABIstem in wetter and cooler summers, but this bias was reduced to ~2% when scaling ABIstem to the plot level. These results suggest that F. sylvatica prioritizes structural carbon sinks close to the canopy when conditions are unfavorable. The different axial variability in RW and ρ thereby indicates some independence of the processes that drive volume growth and wood structure along the stem. This refines our knowledge of carbon allocation dynamics in temperate diffuse-porous species and contributes to reducing uncertainties in determining forest carbon fixation.