diff --git a/src/java/org/codehaus/groovy/grails/orm/hibernate/support/HibernatePersistenceContextInterceptor.java b/src/java/org/codehaus/groovy/grails/orm/hibernate/support/HibernatePersistenceContextInterceptor.java
index a2c821ebfa0..de6611aec23 100644
--- a/src/java/org/codehaus/groovy/grails/orm/hibernate/support/HibernatePersistenceContextInterceptor.java
+++ b/src/java/org/codehaus/groovy/grails/orm/hibernate/support/HibernatePersistenceContextInterceptor.java
@@ -34,12 +34,13 @@ public class HibernatePersistenceContextInterceptor implements PersistenceContex
     private static final Log LOG = LogFactory.getLog(HibernatePersistenceContextInterceptor.class);
     private SessionFactory sessionFactory;
     private boolean participate;
+    private int nestingCount = 0;
 
     /* (non-Javadoc)
      * @see org.codehaus.groovy.grails.support.PersistenceContextInterceptor#destroy()
      */
     public void destroy() {
-        if (participate) {
+        if (--nestingCount > 0 || participate) {
             return;
         }
 
@@ -98,6 +99,9 @@ public boolean isOpen() {
      * @see org.codehaus.groovy.grails.support.PersistenceContextInterceptor#init()
      */
     public void init() {
+        if (++nestingCount > 1) {
+            return;
+        }
         if (TransactionSynchronizationManager.hasResource(sessionFactory)) {
             // Do not modify the Session: just set the participate flag.
             participate = true;
diff --git a/src/test/org/codehaus/groovy/grails/orm/hibernate/support/HibernatePersistenceContextInterceptorTests.groovy b/src/test/org/codehaus/groovy/grails/orm/hibernate/support/HibernatePersistenceContextInterceptorTests.groovy
new file mode 100644
index 00000000000..3439cfce610
--- /dev/null
+++ b/src/test/org/codehaus/groovy/grails/orm/hibernate/support/HibernatePersistenceContextInterceptorTests.groovy
@@ -0,0 +1,62 @@
+package org.codehaus.groovy.grails.orm.hibernate.support
+
+import org.codehaus.groovy.grails.orm.hibernate.AbstractGrailsHibernateTests
+import org.springframework.transaction.support.TransactionSynchronizationManager
+import org.springframework.orm.hibernate3.SessionFactoryUtils
+import org.springframework.orm.hibernate3.SessionHolder
+import org.hibernate.Session
+import org.hibernate.SessionFactory
+import java.util.concurrent.CountDownLatch
+
+/**
+ * @author Luke Daley
+ * @since 1.4
+ */
+class HibernatePersistenceContextInterceptorTests extends AbstractGrailsHibernateTests {
+
+    protected void setUp() {
+        super.setUp()
+        
+        // We are going to manage the session ourselves through the interceptor
+        def holder = TransactionSynchronizationManager.getResource(sessionFactory)
+        def s = holder.session
+        TransactionSynchronizationManager.unbindResource(sessionFactory)
+        SessionFactoryUtils.releaseSession(s, sessionFactory)       
+    }
+
+    void testSimpleLifecycle() {
+        def interceptor = getInterceptor()
+        assertEquals("interceptor open", false, interceptor.open)
+        interceptor.init()
+        assertEquals("interceptor open", true, interceptor.open)
+        interceptor.destroy()
+        assertEquals("interceptor open", false, interceptor.open)
+        interceptor.init()
+        assertEquals("interceptor open", true, interceptor.open)
+        interceptor.destroy()
+        assertEquals("interceptor open", false, interceptor.open)
+    }
+
+    void testNestedLifecycle() {
+        def interceptor = getInterceptor()
+        assertEquals("interceptor open", false, interceptor.open)
+        
+        interceptor.init()
+        assertEquals("interceptor open", true, interceptor.open)
+        interceptor.init()
+        assertEquals("interceptor open", true, interceptor.open)
+        interceptor.destroy()
+        assertEquals("interceptor open", true, interceptor.open)
+        interceptor.destroy()
+        assertEquals("interceptor open", false, interceptor.open)
+        
+        interceptor.init()
+        assertEquals("interceptor open", true, interceptor.open)
+        interceptor.destroy()
+        assertEquals("interceptor open", false, interceptor.open)
+    }
+    
+    protected getInterceptor() {
+        appCtx.persistenceInterceptor
+    }
+}