diff --git a/compiler.h b/compiler.h
index c70c50d2b..e604e4da2 100644
--- a/compiler.h
+++ b/compiler.h
@@ -1,7 +1,7 @@
 #ifndef __compiler_H
 #define __compiler_H
 /*
- * Copyright (c) 1999-2008 Stephen Williams (steve@icarus.com)
+ * Copyright (c) 1999-2009 Stephen Williams (steve@icarus.com)
  *
  *    This source code is free software; you can redistribute it
  *    and/or modify it in source code form under the terms of the GNU
@@ -36,6 +36,12 @@
  */
 extern unsigned integer_width;
 
+/*
+ * This is the maximum number of recursive module loops allowed within
+ * a generate block.
+ */
+extern unsigned recursive_mod_limit;
+
 /* The TIME_WIDTH is the width of time variables. */
 #ifndef TIME_WIDTH
 # define TIME_WIDTH 64
diff --git a/elab_scope.cc b/elab_scope.cc
index 5ee6861de..03bb3664a 100644
--- a/elab_scope.cc
+++ b/elab_scope.cc
@@ -919,21 +919,44 @@ void PGModule::elaborate_scope_mod_(Design*des, Module*mod, NetScope*sc) const
 	// check for recursive instantiation by scanning the current
 	// scope and its parents. Look for a module instantiation of
 	// the same module, but farther up in the scope.
-
+      unsigned rl_count = 0;
+      bool in_genblk = false;
       for (NetScope*scn = sc ;  scn ;  scn = scn->parent()) {
-	    if (scn->type() != NetScope::MODULE)
+	      // We need to know if we are inside a generate block to allow
+	      // recursive instances.
+	    if (scn->type() == NetScope::GENBLOCK) {
+		  in_genblk = true;
 		  continue;
+	    }
 
-	    if (strcmp(mod->mod_name(), scn->module_name()) != 0)
+	    if (scn->type() != NetScope::MODULE) continue;
+
+	    if (strcmp(mod->mod_name(), scn->module_name()) != 0) continue;
+
+	      // We allow nested scopes if they are inside a generate block,
+	      // but only to a certain nesting depth.
+	    if (in_genblk) {
+		  rl_count += 1;
+		  if (rl_count > recursive_mod_limit) {
+			cerr << get_fileline() << ": error: instance "
+			     << scope_path(sc) << "." << get_name()
+			     << " of module " << mod->mod_name()
+			     << " is nested too deep." << endl;
+			cerr << get_fileline() << ":      : check for "
+			        "proper recursion termination or increase the "
+			        "limit (" << recursive_mod_limit
+			     << ") with the -pRECURSIVE_MOD_LIMIT flag."
+			     << endl;
+			des->errors += 1;
+			return;
+		  }
 		  continue;
+	    }
 
 	    cerr << get_fileline() << ": error: You cannot instantiate "
 		 << "module " << mod->mod_name() << " within itself." << endl;
-
 	    cerr << get_fileline() << ":      : The offending instance is "
-		 << scope_path(sc) << "." << get_name() << " within "
-		 << scope_path(scn) << "." << endl;
-
+		 << get_name() << " within " << scope_path(scn) << "." << endl;
 	    des->errors += 1;
 	    return;
       }
diff --git a/main.cc b/main.cc
index f4b18ab01..c692a154a 100644
--- a/main.cc
+++ b/main.cc
@@ -133,6 +133,7 @@ bool debug_optimizer = false;
  */
 bool disable_virtual_pins = false;
 unsigned long array_size_limit = 16777216;  // Minimum required by IEEE-1364?
+unsigned recursive_mod_limit = 10;
 
 /*
  * Verbose messages enabled.
@@ -717,9 +718,13 @@ int main(int argc, char*argv[])
 
       const char *flag_tmp = flags["DISABLE_VIRTUAL_PINS"];
       if (flag_tmp) disable_virtual_pins = strcmp(flag_tmp,"true")==0;
+
       flag_tmp = flags["ARRAY_SIZE_LIMIT"];
       if (flag_tmp) array_size_limit = strtoul(flag_tmp,NULL,0);
 
+      flag_tmp = flags["RECURSIVE_MOD_LIMIT"];
+      if (flag_tmp) recursive_mod_limit = strtoul(flag_tmp,NULL,0);
+
 	/* Parse the input. Make the pform. */
       int rc = pform_parse(argv[optind]);