diff --git a/main-actions/src/main/scala/sbt/Tests.scala b/main-actions/src/main/scala/sbt/Tests.scala
index e0dbbffa9..97a3b2452 100644
--- a/main-actions/src/main/scala/sbt/Tests.scala
+++ b/main-actions/src/main/scala/sbt/Tests.scala
@@ -9,6 +9,7 @@ import sbt.internal.inc.Analysis
 import TaskExtra._
 import sbt.internal.util.FeedbackProvidedException
 import xsbti.api.Definition
+import xsbti.api.ClassLike
 import xsbti.compile.CompileAnalysis
 import ConcurrentRestrictions.Tag
 
@@ -385,7 +386,11 @@ object Tests {
       defined(subclasses, d.baseClasses, d.isModule) ++
         defined(annotations, d.annotations, d.isModule)
 
-    val discovered = Discovery(firsts(subclasses), firsts(annotations))(definitions)
+    val discovered = Discovery(firsts(subclasses), firsts(annotations))(definitions.filter {
+      case c: ClassLike =>
+        c.topLevel
+      case _ => false
+    })
     // TODO: To pass in correct explicitlySpecified and selectors
     val tests = for ((df, di) <- discovered; fingerprint <- toFingerprints(di))
       yield new TestDefinition(df.name, fingerprint, false, Array(new SuiteSelector))
diff --git a/notes/1.0.3/nested-tests.md b/notes/1.0.3/nested-tests.md
new file mode 100644
index 000000000..c34f3d41f
--- /dev/null
+++ b/notes/1.0.3/nested-tests.md
@@ -0,0 +1,16 @@
+### Bug fixes
+
+In 0.13.x, zinc would discover only top-level objects and classes
+containing tests, and pass them to the test framework. In 1.x,
+however, zinc can discover also nested objects and classes; that
+causes the "name" of a ClassLike to no longer be usable for reflection.
+
+Version 1.0.3 filters out nested objects/classes from the list,
+restoring compatibility with 0.13. A zinc extension of ClassLike
+will probably be introduced in 1.1 or 1.2, in order to provide
+the test framework with enough information to deal with nested
+classes.
+
+[@cunei]: https://github.com/cunei
+[3583]: https://github.com/sbt/sbt/issues/3583
+
diff --git a/sbt/src/sbt-test/tests/nested-tests/build.sbt b/sbt/src/sbt-test/tests/nested-tests/build.sbt
new file mode 100644
index 000000000..2e47706f6
--- /dev/null
+++ b/sbt/src/sbt-test/tests/nested-tests/build.sbt
@@ -0,0 +1,8 @@
+libraryDependencies += "org.scalacheck" %% "scalacheck" % "1.13.5" % "test"
+
+version := "0.0.1"
+name := "broken"
+organization := "org.catastrophe"
+//scalaVersion := "2.10.6"
+scalaVersion := "2.12.3"
+
diff --git a/sbt/src/sbt-test/tests/nested-tests/src/test/scala/q/X.scala b/sbt/src/sbt-test/tests/nested-tests/src/test/scala/q/X.scala
new file mode 100644
index 000000000..6c80f0bce
--- /dev/null
+++ b/sbt/src/sbt-test/tests/nested-tests/src/test/scala/q/X.scala
@@ -0,0 +1,25 @@
+package q
+
+//
+// On 1.0.3+ this test will say:
+// [info] + Nesting.startsWith: OK, passed 100 tests.
+// [info] Passed: Total 1, Failed 0, Errors 0, Passed 1
+//
+// On 1.0.0 to 1.0.2 it will crash with:
+// [error] java.lang.ClassNotFoundException: q.X.Y$
+//
+
+import org.scalacheck.{Prop, Properties}
+import Prop.forAll
+
+class U extends Properties("Nesting")
+object X extends U {
+    property("startsWith") = forAll { (a: String, b: String) =>
+    (a+b).startsWith(a)
+  }
+  object Y extends U {
+    property("endsWith") = forAll { (a: String, b: String) =>
+      (a+b).endsWith(b)
+    }
+  }
+}
diff --git a/sbt/src/sbt-test/tests/nested-tests/test b/sbt/src/sbt-test/tests/nested-tests/test
new file mode 100644
index 000000000..c8987ae90
--- /dev/null
+++ b/sbt/src/sbt-test/tests/nested-tests/test
@@ -0,0 +1,2 @@
+> test
+