Plywood is made of three or more thin layers of wood bonded together with an adhesive. Each layer of wood, or ply, is usually oriented with its grain running at right angles to the adjacent layer in order to reduce the shrinkage and improve the strength of the finished piece. Most plywood is pressed into large, flat sheets used in building construction. Other plywood pieces may be formed into simple or compound curves for use in furniture, boats, and etc.

The outer layers of plywood are known respectively as the face and the back. The face is the surface that is to be used or seen, while the back remains unused or hidden. The center layer is known as the core. In plywood with five or more plies, the inter-mediate layers are known as the crossbands.

Plywood may be made from hardwoods, softwoods, or a combination of both. Some common hardwoods include ash, maple, mahogany, oak, and teak. The most common softwood used to make plywood in the United States is Douglas fir, although several varieties of pine, cedar, spruce, and redwood are also being used.

Composite plywood has a core made of particleboard or solid lumber pieces joined edge to edge. It is finished with a plywood veneer face and back. Composite plywood is used where very thick sheets are needed.

The type of adhesive used to bond the layers of wood together depends on the specific application for the finished plywood. Softwood plywood sheets designed for installation on the exterior of a structure usually use a phenol-formaldehyde resin as an adhesive cause of its excellent strength and resistance to moisture. Softwood plywood sheets designed for installation on the interior of a structure may use a blood protein or a soybean protein adhesive, although most softwood interior sheets are now made with the same phenol-formaldehyde resin used for exterior sheets. Hardwood plywood used for interior applications and in the construction of furniture usually is made with a urea-formaldehyde resin.

The adhesives used in plywood have become a point of concern. Both urea formaldehyde and phenol formaldehyde are carcinogenic in very high concentrations. As a result, many manufacturers are turning to low formaldehyde-emitting glue systems, denoted by an "E" rating. Plywood produced to "E0" has effectively zero formaldehyde emissions.

Some applications require plywood sheets that have a thin layer of plastic, metal, or resin-impregnated paper or fabric bonded to either the face or back (or both) to give the outer surface additional resistance to moisture and abrasion or to improve its paint-holding properties. Such plywood is called overlaid plywood and is commonly used in the construction, transportation, and agricultural industries.

Other plywood sheets may be coated with a liquid stain to give the surfaces a finished appearance, or may be treated with various chemicals to improve the plywood's flame resistance or resistance to decay.