diff --git a/value/src/main/java/com/google/auto/value/processor/AutoValueProcessor.java b/value/src/main/java/com/google/auto/value/processor/AutoValueProcessor.java
index 7d717698f9..b527b739e9 100644
--- a/value/src/main/java/com/google/auto/value/processor/AutoValueProcessor.java
+++ b/value/src/main/java/com/google/auto/value/processor/AutoValueProcessor.java
@@ -357,7 +357,7 @@ private void processType(TypeElement type) {
       errorReporter.abortWithError("@AutoValue may not be used to implement an annotation"
           + " interface; try using @AutoAnnotation instead", type);
     }
-    checkTopLevelOrStatic(type);
+    checkModifiersIfNested(type);
 
     ImmutableSet<ExecutableElement> methods =
         getLocalAndInheritedMethods(type, processingEnv.getElementUtils());
@@ -565,11 +565,15 @@ private String nameWithoutPrefix(String name) {
     return Introspector.decapitalize(name);
   }
 
-  private void checkTopLevelOrStatic(TypeElement type) {
+  private void checkModifiersIfNested(TypeElement type) {
     ElementKind enclosingKind = type.getEnclosingElement().getKind();
-    if ((enclosingKind.isClass() || enclosingKind.isInterface())
-        && !type.getModifiers().contains(Modifier.STATIC)) {
-      errorReporter.abortWithError("Nested @AutoValue class must be static", type);
+    if (enclosingKind.isClass() || enclosingKind.isInterface()) {
+      if (type.getModifiers().contains(Modifier.PRIVATE)) {
+        errorReporter.abortWithError("@AutoValue class must not be private", type);
+      }
+      if (!type.getModifiers().contains(Modifier.STATIC)) {
+        errorReporter.abortWithError("Nested @AutoValue class must be static", type);
+      }
     }
     // In principle type.getEnclosingElement() could be an ExecutableElement (for a class
     // declared inside a method), but since RoundEnvironment.getElementsAnnotatedWith doesn't
diff --git a/value/src/test/java/com/google/auto/value/processor/CompilationTest.java b/value/src/test/java/com/google/auto/value/processor/CompilationTest.java
index c5a33be75c..ea9f37c94f 100644
--- a/value/src/test/java/com/google/auto/value/processor/CompilationTest.java
+++ b/value/src/test/java/com/google/auto/value/processor/CompilationTest.java
@@ -242,6 +242,31 @@ public void autoValueMustBeStatic() {
         .in(javaFileObject).onLine(7);
   }
 
+  @Test
+  public void autoValueMustBeNotBePrivate() {
+    JavaFileObject javaFileObject = JavaFileObjects.forSourceLines(
+        "foo.bar.Baz",
+        "package foo.bar;",
+        "",
+        "import com.google.auto.value.AutoValue;",
+        "",
+        "public class Baz {",
+        "  @AutoValue",
+        "  private abstract static class Private {",
+        "    public abstract String buh();",
+        "    public Private create(String buh) {",
+        "      return new AutoValue_Baz_Private(buh);",
+        "    }",
+        "  }",
+        "}");
+    assertAbout(javaSource())
+        .that(javaFileObject)
+        .processedWith(new AutoValueProcessor())
+        .failsToCompile()
+        .withErrorContaining("@AutoValue class must not be private")
+        .in(javaFileObject).onLine(7);
+  }
+
   @Test
   public void noMultidimensionalPrimitiveArrays() throws Exception {
     JavaFileObject javaFileObject = JavaFileObjects.forSourceLines(