Some of the most damaging tree pathogens can attack woody stems, causing lesions (cankers) that may be lethal. To identify the genomic determinants of wood colonization leading to canker formation, we sequenced the genomes of the poplar canker pathogen, Mycosphaerella populorum, and the closely related poplar leaf pathogen, M. populicola. A secondary metabolite cluster unique to M. populorum is fully activated following induction by poplar wood and leaves. In addition, genes encoding hemicellulose-degrading enzymes, peptidases, and metabolite transporters were more abundant and were up-regulated in M. populorum growing on poplar wood-chip medium compared with M. populicola. The secondary gene cluster and several of the carbohydrate degradation genes have the signature of horizontal transfer from ascomycete fungi associated with wood decay and from prokaryotes. Acquisition and maintenance of the gene battery necessary for growth in woody tissues and gene dosage resulting in gene expression reconfiguration appear to be responsible for the adaptation of M. populorum to infect, colonize, and cause mortality on poplar woody stems.