diff --git a/modules/swagger-parser/src/main/java/io/swagger/parser/processors/ExternalRefProcessor.java b/modules/swagger-parser/src/main/java/io/swagger/parser/processors/ExternalRefProcessor.java
index 8bac000c85..b28a57cce2 100644
--- a/modules/swagger-parser/src/main/java/io/swagger/parser/processors/ExternalRefProcessor.java
+++ b/modules/swagger-parser/src/main/java/io/swagger/parser/processors/ExternalRefProcessor.java
@@ -1,6 +1,7 @@
 package io.swagger.parser.processors;
 
 import io.swagger.models.Model;
+import io.swagger.models.RefModel;
 import io.swagger.models.Swagger;
 import io.swagger.models.properties.Property;
 import io.swagger.models.properties.RefProperty;
@@ -48,6 +49,15 @@ public String processRefToExternalDefinition(String $ref, RefFormat refFormat) {
 
 
         //If this is a new model, then check it for other sub references
+        String file = $ref.split("#/")[0];
+        if (model instanceof RefModel) {
+            RefModel refModel = (RefModel) model;
+            if(isAnExternalRefFormat(refModel.getRefFormat())) {
+                refModel.set$ref(processRefToExternalDefinition(refModel.get$ref(), refModel.getRefFormat()));
+            } else {
+                processRefToExternalDefinition(file + refModel.get$ref(), RefFormat.RELATIVE);
+            }
+        }
         //Loop the properties and recursively call this method;
         Map<String, Property> subProps = model.getProperties();
         if(subProps != null) {
@@ -55,8 +65,11 @@ public String processRefToExternalDefinition(String $ref, RefFormat refFormat) {
                 if (prop.getValue() instanceof RefProperty) {
                     RefProperty subRef = (RefProperty) prop.getValue();
 
-                    if(isAnExternalRefFormat(subRef.getRefFormat()))
+                    if(isAnExternalRefFormat(subRef.getRefFormat())) {
                         subRef.set$ref(processRefToExternalDefinition(subRef.get$ref(), subRef.getRefFormat()));
+                    } else {
+                        processRefToExternalDefinition(file + subRef.get$ref(), RefFormat.RELATIVE);
+                    }
                 }
             }
         }
diff --git a/modules/swagger-parser/src/test/java/io/swagger/parser/SwaggerParserTest.java b/modules/swagger-parser/src/test/java/io/swagger/parser/SwaggerParserTest.java
index c408097a34..414cfa341a 100644
--- a/modules/swagger-parser/src/test/java/io/swagger/parser/SwaggerParserTest.java
+++ b/modules/swagger-parser/src/test/java/io/swagger/parser/SwaggerParserTest.java
@@ -138,6 +138,17 @@ public void testLoadRelativeFileTree_Json() throws Exception {
         //Json.mapper().writerWithDefaultPrettyPrinter().writeValue(new File("resolved.json"), swagger);
     }
 
+    @Test
+    public void testLoadExternalNestedDefinitions() throws Exception {
+        SwaggerParser parser = new SwaggerParser();
+        final Swagger swagger = parser.read("src/test/resources/nested-references/b.yaml");
+        Map<String, Model> definitions = swagger.getDefinitions();
+        assertTrue(definitions.containsKey("x"));
+        assertTrue(!definitions.containsKey("y"));
+        assertTrue(definitions.containsKey("z"));
+        assertEquals(((RefModel) definitions.get("i")).get$ref(), "#/definitions/k");
+    }
+
     @Test
     public void testPetstore() throws Exception {
         SwaggerParser parser = new SwaggerParser();
diff --git a/modules/swagger-parser/src/test/resources/nested-references/a.yaml b/modules/swagger-parser/src/test/resources/nested-references/a.yaml
new file mode 100644
index 0000000000..40a55974b7
--- /dev/null
+++ b/modules/swagger-parser/src/test/resources/nested-references/a.yaml
@@ -0,0 +1,16 @@
+---
+swagger: "2.0"
+info:
+  title: test
+  version: '0.0.0'
+paths: {}
+definitions:
+  y:
+    $ref: "#/definitions/z"
+  z:
+    type: object
+    properties:
+      name:
+        type: string
+  j:
+    $ref: "./b.yaml#/definitions/k"
diff --git a/modules/swagger-parser/src/test/resources/nested-references/b.yaml b/modules/swagger-parser/src/test/resources/nested-references/b.yaml
new file mode 100644
index 0000000000..184f5ae814
--- /dev/null
+++ b/modules/swagger-parser/src/test/resources/nested-references/b.yaml
@@ -0,0 +1,16 @@
+---
+swagger: "2.0"
+info:
+  title: test
+  version: '0.0.0'
+paths: {}
+definitions:
+  x:
+    $ref: "./a.yaml#/definitions/y"
+  i:
+    $ref: "./a.yaml#/definitions/j"
+  k:
+    type: object
+    properties:
+      name:
+        type: string