The influence of the loading orientation with respect to the grain direction of wood and the influence of the lateral dowel displacement boundary condition on the embedment behaviour of steel dowels in laminated veneer lumber (with parallel-laminated veneers) are investigated in this study. For limit states of the lateral boundary condition, the load-displacement behaviour was experimentally studied by means of full-hole embedment tests on screw-reinforced laminated veneer lumber, for two dowel diameters and up to large dowel displacements. A novel biaxial test set-up is proposed for embedment tests with constrained lateral dowel displacement boundary condition, in order to quantify laterally evoked reaction forces. Corresponding forces were found to change orientation with increasing dowel displacement and amounted to about 20% and 40% of the vertical reaction force for dowel displacements of 5 mm and twice the dowel diameter, respectively. The influence of the lateral displacement boundary condition was highlighted by comparison of the test data with a previously established data set for unconstrained embedment testing. Constrained loading showed a stiffer response and higher nominal embedment stresses, as well as a more pronounced displacement hardening, compared to unconstrained loading.