diff --git a/src/dropdown/docs/demo.html b/src/dropdown/docs/demo.html
index f6c16fd542..a555691e4e 100644
--- a/src/dropdown/docs/demo.html
+++ b/src/dropdown/docs/demo.html
@@ -55,7 +55,7 @@
         <li><a href="#">Separated link</a></li>
       </ul>
     </div>
-    
+
     <!-- Single button using template-url -->
     <div class="btn-group" dropdown>
       <button type="button" class="btn btn-primary dropdown-toggle" dropdown-toggle ng-disabled="disabled">
@@ -65,12 +65,30 @@
       </ul>
     </div>
 
+   <!-- Single button with nesting and auto-clise set to outsideClick -->
+   <div class="btn-group" dropdown auto-close="outsideClick">
+      <button type="button" class="btn btn-primary dropdown-toggle" dropdown-toggle ng-disabled="disabled">
+         Nested dropdown <span class="caret"></span>
+      </button>
+      <ul class="dropdown-menu" role="menu">
+         <li><a href="#">Action</a></li>
+         <li><a href="#">Another action</a></li>
+         <li dropdown>
+            <a href="#" dropdown-toggle>Open nested Dropdown</a>
+            <ul class="dropdown-menu" role="menu">
+               <li><a href="#">Nested action</a></li>
+               <li><a href="#">Another nested action</a></li>
+            </ul>
+         </li>
+      </ul>
+   </div>
+
     <hr />
     <p>
         <button type="button" class="btn btn-default btn-sm" ng-click="toggleDropdown($event)">Toggle button dropdown</button>
         <button type="button" class="btn btn-warning btn-sm" ng-click="disabled = !disabled">Enable/Disable</button>
     </p>
-    
+
     <script type="text/ng-template" id="dropdown.html">
         <ul class="dropdown-menu" role="menu">
           <li><a href="#">Action in Template</a></li>
diff --git a/src/dropdown/docs/readme.md b/src/dropdown/docs/readme.md
index 8bfc8cf2f5..76c635d9c3 100644
--- a/src/dropdown/docs/readme.md
+++ b/src/dropdown/docs/readme.md
@@ -2,6 +2,7 @@
 Dropdown is a simple directive which will toggle a dropdown menu on click or programmatically.
 You can either use `is-open` to toggle or add inside a `<a dropdown-toggle>` element to toggle it when is clicked.
 There is also the `on-toggle(open)` optional expression fired when dropdown changes state.
+Dropdowns can be nested to reflect hierarchies in menus. Make sure to nest the dropdowns in the DOM to utilize this feature.
 
 Add `dropdown-append-to-body` to the `dropdown` element to append to the inner `dropdown-menu` to the body.
 This is useful when the dropdown button is inside a div with `overflow: hidden`, and the menu would otherwise be hidden.
diff --git a/src/dropdown/dropdown.js b/src/dropdown/dropdown.js
index 816629c98c..3918d42a8e 100644
--- a/src/dropdown/dropdown.js
+++ b/src/dropdown/dropdown.js
@@ -4,57 +4,95 @@ angular.module('ui.bootstrap.dropdown', ['ui.bootstrap.position'])
   openClass: 'open'
 })
 
-.service('dropdownService', ['$document', '$rootScope', function($document, $rootScope) {
-  var openScope = null;
+.service('dropdownService', ['$document', '$rootScope', function ($document, $rootScope) {
+  var openScopes = [];
 
-  this.open = function( dropdownScope ) {
-    if ( !openScope ) {
+  this.open = function(dropdownScope) {
+    var upperScope = getUpperScope();
+
+    if (!upperScope) {
       $document.bind('click', closeDropdown);
       $document.bind('keydown', escapeKeyBind);
     }
 
-    if ( openScope && openScope !== dropdownScope ) {
-        openScope.isOpen = false;
+    while(upperScope && upperScope !== dropdownScope) {
+      // contained dropdown, do not close dropdown
+      if (upperScope.getElement()[0].contains(dropdownScope.getElement()[0])) {
+        break;
+      }
+
+      openScopes.pop().isOpen = false;
+      upperScope = getUpperScope();
     }
 
-    openScope = dropdownScope;
+    openScopes.push(dropdownScope);
   };
 
-  this.close = function( dropdownScope ) {
-    if ( openScope === dropdownScope ) {
-      openScope = null;
+  this.close = function(dropdownScope) {
+
+    if (openScopes.indexOf(dropdownScope) > -1) {
+      var upperScope = getUpperScope();
+      while (upperScope) {
+        openScopes.pop().isOpen = false;
+        if (upperScope === dropdownScope) {
+          break;
+        }
+      }
+    }
+
+    if ( !getUpperScope() ) {
       $document.unbind('click', closeDropdown);
       $document.unbind('keydown', escapeKeyBind);
     }
   };
 
-  var closeDropdown = function( evt ) {
-    // This method may still be called during the same mouse event that
-    // unbound this event handler. So check openScope before proceeding.
-    if (!openScope) { return; }
+  var getUpperScope = function() {
+    if (openScopes.length === 0) {
+      return null;
+    }
 
-    if( evt && openScope.getAutoClose() === 'disabled' )  { return ; }
+    return openScopes[openScopes.length-1];
+  };
 
-    var toggleElement = openScope.getToggleElement();
-    if ( evt && toggleElement && toggleElement[0].contains(evt.target) ) {
-        return;
-    }
+  var closeDropdown = function(evt) {
+    var upperScope = getUpperScope();
+    while (upperScope) {
 
-    var $element = openScope.getElement();
-    if( evt && openScope.getAutoClose() === 'outsideClick' && $element && $element[0].contains(evt.target) ) {
-      return;
-    }
+      // This method may still be called during the same mouse event that
+      // unbound this event handler. So check upperScope before proceeding.
+      if (!upperScope) { break; }
+
+      if (evt && upperScope.getAutoClose() === 'disabled' )  { break; }
 
-    openScope.isOpen = false;
+      var toggleElement = upperScope.getToggleElement();
+      if (evt && toggleElement && toggleElement[0].contains(evt.target) ) {
+        break;
+      }
+
+      var $element = upperScope.getElement();
+      if (evt && upperScope.getAutoClose() === 'outsideClick' && $element && $element[0].contains(evt.target) ) {
+        break;
+      }
+
+      upperScope.isOpen = false;
+      openScopes.pop();
+
+      if (!$rootScope.$$phase) {
+        upperScope.$apply();
+      }
+
+      // just close upper dropdown if ESC was pressed
+      if (angular.isUndefined(evt)) {
+        break;
+      }
 
-    if (!$rootScope.$$phase) {
-      openScope.$apply();
+      upperScope = getUpperScope();
     }
   };
 
-  var escapeKeyBind = function( evt ) {
-    if ( evt.which === 27 ) {
-      openScope.focusToggleElement();
+  var escapeKeyBind = function(evt) {
+    if (evt.which === 27) {
+      getUpperScope().focusToggleElement();
       closeDropdown();
     }
   };
diff --git a/src/dropdown/test/dropdown.spec.js b/src/dropdown/test/dropdown.spec.js
index fc99695dbf..6d054047c1 100644
--- a/src/dropdown/test/dropdown.spec.js
+++ b/src/dropdown/test/dropdown.spec.js
@@ -17,7 +17,7 @@ describe('dropdownToggle', function() {
 
   var clickDropdownToggle = function(elm) {
     elm = elm || element;
-    elm.find('a[dropdown-toggle]').click();
+    elm.find('a[dropdown-toggle]')[0].click();
   };
 
   var triggerKeyDown = function (element, keyCode) {
@@ -183,7 +183,7 @@ describe('dropdownToggle', function() {
       expect(element.hasClass(dropdownConfig.openClass)).toBe(false);
     });
   });
-  
+
   describe('using dropdownMenuTemplate', function() {
     function dropdown() {
       $templateCache.put('custom.html', '<ul class="dropdown-menu"><li>Item 1</li></ul>');
@@ -194,7 +194,7 @@ describe('dropdownToggle', function() {
     beforeEach(function() {
       element = dropdown();
     });
-    
+
     it('should apply custom template for dropdown menu', function() {
       element.find('a').click();
       expect(element.find('ul.dropdown-menu').eq(0).find('li').eq(0).text()).toEqual('Item 1');
@@ -468,4 +468,95 @@ describe('dropdownToggle', function() {
       expect(elm1.hasClass(dropdownConfig.openClass)).toBe(true);
     });
   });
+
+  describe('nesting', function () {
+    var outerElement, innerElement, otherElement;
+
+    beforeEach(function() {
+      innerElement = dropdown($rootScope);
+      outerElement = dropdown($rootScope.$new());
+      otherElement = dropdown($rootScope.$new());
+      wrapDropdown(outerElement, innerElement);
+    });
+
+    function dropdown(scope) {
+      return $compile('<li dropdown><a href dropdown-toggle></a><ul><li><a href>Hello</a></li></ul></li>')(scope);
+    }
+
+    function wrapDropdown(outerElement, innerElement) {
+      angular.element(outerElement.find('ul')[0]).append(innerElement);
+    }
+
+    it('should open nested dropdown', function () {
+      expect(outerElement.hasClass(dropdownConfig.openClass)).toBe(false);
+      expect(innerElement.hasClass(dropdownConfig.openClass)).toBe(false);
+      clickDropdownToggle(outerElement);
+      expect(outerElement.hasClass(dropdownConfig.openClass)).toBe(true);
+      expect(innerElement.hasClass(dropdownConfig.openClass)).toBe(false);
+      clickDropdownToggle(innerElement);
+      expect(outerElement.hasClass(dropdownConfig.openClass)).toBe(true);
+      expect(innerElement.hasClass(dropdownConfig.openClass)).toBe(true);
+    });
+
+    it('should toggle inner dropdown', function () {
+      clickDropdownToggle(outerElement);
+      clickDropdownToggle(innerElement);
+      expect(outerElement.hasClass(dropdownConfig.openClass)).toBe(true);
+      expect(innerElement.hasClass(dropdownConfig.openClass)).toBe(true);
+      clickDropdownToggle(innerElement);
+      expect(outerElement.hasClass(dropdownConfig.openClass)).toBe(true);
+      expect(innerElement.hasClass(dropdownConfig.openClass)).toBe(false);
+    });
+
+    it('should close on document click', function () {
+      clickDropdownToggle(outerElement);
+      clickDropdownToggle(innerElement);
+      expect(outerElement.hasClass(dropdownConfig.openClass)).toBe(true);
+      expect(innerElement.hasClass(dropdownConfig.openClass)).toBe(true);
+      $document.click();
+      expect(outerElement.hasClass(dropdownConfig.openClass)).toBe(false);
+      expect(innerElement.hasClass(dropdownConfig.openClass)).toBe(false);
+    });
+
+    it('should close inner on escape key & focus inner toggle element', function() {
+      $document.find('body').append(outerElement);
+      clickDropdownToggle(outerElement);
+      clickDropdownToggle(innerElement);
+      triggerKeyDown($document, 27);
+      expect(outerElement.hasClass(dropdownConfig.openClass)).toBe(true);
+      expect(innerElement.hasClass(dropdownConfig.openClass)).toBe(false);
+      expect(isFocused(innerElement.find('a'))).toBe(true);
+    });
+
+    it('should not close on backspace key', function() {
+      clickDropdownToggle(outerElement);
+      clickDropdownToggle(innerElement);
+      triggerKeyDown($document, 8);
+      expect(outerElement.hasClass(dropdownConfig.openClass)).toBe(true);
+      expect(innerElement.hasClass(dropdownConfig.openClass)).toBe(true);
+    });
+
+    it('should close on $location change', function() {
+      clickDropdownToggle(outerElement);
+      clickDropdownToggle(innerElement);
+      expect(outerElement.hasClass(dropdownConfig.openClass)).toBe(true);
+      expect(innerElement.hasClass(dropdownConfig.openClass)).toBe(true);
+      $rootScope.$broadcast('$locationChangeSuccess');
+      $rootScope.$apply();
+      expect(outerElement.hasClass(dropdownConfig.openClass)).toBe(false);
+      expect(innerElement.hasClass(dropdownConfig.openClass)).toBe(false);
+    });
+
+    it('should close nested dropdowns and open other dropdown', function () {
+      clickDropdownToggle(outerElement);
+      clickDropdownToggle(innerElement);
+      expect(outerElement.hasClass(dropdownConfig.openClass)).toBe(true);
+      expect(innerElement.hasClass(dropdownConfig.openClass)).toBe(true);
+      expect(otherElement.hasClass(dropdownConfig.openClass)).toBe(false);
+      clickDropdownToggle(otherElement);
+      expect(outerElement.hasClass(dropdownConfig.openClass)).toBe(false);
+      expect(innerElement.hasClass(dropdownConfig.openClass)).toBe(false);
+      expect(otherElement.hasClass(dropdownConfig.openClass)).toBe(true);
+    });
+  });
 });