The radiation of angiosperms led to the emergence of the vast majority of today's plant species and all our major food crops. Their extraordinary diversification occurred in conjunction with the evolution of a more efficient vascular system for the transport of water, composed of vessel elements. The physical dimensions of these water-conducting specialized cells have played a critical role in angiosperm evolution; they determine resistance to water flow, influence photosynthesis rate, and contribute to plant stature. However, the genetic factors that determine their dimensions are unclear. Here we show that a previously uncharacterized gene, ENLARGED VESSEL ELEMENT (EVE), contributes to the dimensions of vessel elements in Populus, impacting hydraulic conductivity. Our data suggest that EVE is localized in the plasma membrane and is involved in potassium uptake of differentiating xylem cells during vessel development. In plants, EVE first emerged in streptophyte algae, but expanded dramatically among vessel-containing angiosperms. The phylogeny, structure and composition of EVE indicates that it may have been involved in an ancient horizontal gene-transfer event.