Craft it in the potion shop
Found: living wood tree (gem), sawmill, Ivy's hut, all normal trees, Magic garden, Sir Piggy, Feed the Baron, Adventures, Spooky tree, Goddess Tree, Grow Faeriebulb Seeds (craft in Greenhouse rare chance), Faerie Tea Party, Greselda's Dark Garden, Ornate Supply Crate Trade, a chance to win them from the Baron's Game Tent, Bidding Booth, Stargazer's Ridge
Note: All living trees have the same drop rate of Living wood
Note: dead trees, old logs, plant in a log etc do not drop living wood.