Short answer: a 2x4 starts out close to 2" × 4" when it's first cut at the sawmill — but by the time it's dried, planed smooth, and ready to sell, it's been trimmed down to 1½" × 3½". The "2x4" name describes the rough board before that happens, not the finished product in your hands.
Here's roughly what happens to a piece of framing lumber between the tree and the lumber yard:
A board starts as a rough-cut piece close to its nominal name. From there, two separate processes take material off:
Freshly cut lumber is full of water — it's called "green" lumber at this stage. Before it's usable for construction, it gets dried (either in a kiln or by air drying) down to a standard moisture content. As wood loses moisture, its fibers contract, and the board physically shrinks in width and thickness. This isn't a manufacturing trick — it's just what wood does as it dries, the same way a wet sponge is bigger than a dry one.
Rough-sawn lumber has a fuzzy, splintery surface straight off the saw — not something you'd want to frame a wall with or run your hand across. Mills run boards through planers to surface them smooth on all sides (often labeled "S4S," meaning surfaced on four sides). That planing process shaves off additional material beyond what drying alone removed.
This naming convention has been standardized for decades specifically so the lumber industry has consistent terminology — a "2x4" means the same approximate finished product whether you buy it in one state or another. The nominal name traces back to the board's size at that initial rough-cut stage, before drying and surfacing — and that naming convention stuck even as manufacturing processes were standardized over time.
For builders, this matters less than it sounds like it should once you know the actual numbers — every "2x4" you buy is consistently 1½" × 3½", every "2x6" is consistently 1½" × 5½", and so on. The sizing is predictable, it's just not literal.
Always design and order based on actual dimensions, not the nominal name — especially for anything load-bearing, anything that needs to fit a specific opening, or any project where a half-inch difference compounds across multiple boards (like decking or paneling). Use the size lookup tool on the homepage to confirm exact actual dimensions before you cut or order.