diff --git a/inject-generator/src/main/java/io/avaje/inject/generator/InjectProcessor.java b/inject-generator/src/main/java/io/avaje/inject/generator/InjectProcessor.java
index 21feb880..6d3956c3 100644
--- a/inject-generator/src/main/java/io/avaje/inject/generator/InjectProcessor.java
+++ b/inject-generator/src/main/java/io/avaje/inject/generator/InjectProcessor.java
@@ -32,6 +32,7 @@
 import javax.lang.model.element.Element;
 import javax.lang.model.element.ElementKind;
 import javax.lang.model.element.ExecutableElement;
+import javax.lang.model.element.NestingKind;
 import javax.lang.model.element.TypeElement;
 import javax.lang.model.util.ElementFilter;
 import javax.lang.model.util.Elements;
@@ -322,6 +323,9 @@ private void readChangedBeans(Set<TypeElement> beans, boolean factory, boolean i
       if (typeElement.getKind() == ElementKind.INTERFACE) {
         continue;
       }
+      if (factory && typeElement.getNestingKind() != NestingKind.TOP_LEVEL) {
+        logError(typeElement, "@Factory Classes cannot be nested");
+      }
       final var scope = findScope(typeElement);
       if (!factory) {
         // will be found via custom scope so effectively ignore additional @Singleton