Index: Lib/doctest.py
===================================================================
--- Lib/doctest.py	(revision 54419)
+++ Lib/doctest.py	(working copy)
@@ -911,6 +911,20 @@
                     self._find(tests, val, valname, module, source_lines,
                                globs, seen)
 
+        # Look for nested classes and functions in functions.
+        code = obj
+        if inspect.isfunction(obj):
+            code = obj.func_code
+        if inspect.iscode(code) and self._recurse:
+            for const in code.co_consts:
+                # [XX] this should check for _from_module(), but the best
+                # we could do would be to compare filenames, and that is
+                # unreliable because of custom importers.
+                if inspect.iscode(const):
+                    valname = '%s.<nested>.%s' % (name, const.co_name)
+                    self._find(tests, const, valname, module, source_lines,
+                               globs, seen)
+
     def _get_test(self, obj, name, module, globs, source_lines):
         """
         Return a DocTest for the given object, if it defines a docstring;
@@ -920,6 +934,11 @@
         # then return None (no test for this object).
         if isinstance(obj, basestring):
             docstring = obj
+        elif inspect.iscode(obj):
+            if obj.co_consts and isinstance(obj.co_consts[0], basestring):
+                docstring = obj.co_consts[0]
+            else:
+                docstring = ''
         else:
             try:
                 if obj.__doc__ is None:
Index: Lib/test/test_doctest.py
===================================================================
--- Lib/test/test_doctest.py	(revision 54419)
+++ Lib/test/test_doctest.py	(working copy)
@@ -127,6 +127,23 @@
         """
         return self.val
 
+    def nesting_in_functions(self, val):
+        """
+        >>> print SampleNewStyleClass(1).nesting_in_functions(1)
+        1
+        """
+        class NestedClass:
+            """
+            >>> print SampleNewStyleClass(3).nesting_in_functions(3)
+            3
+            """
+        def nested_function():
+            """
+            >>> print SampleNewStyleClass(2).nesting_in_functions(2)
+            2
+            """
+        return val
+
 ######################################################################
 ## Fake stdin (for testing interactive debugging)
 ######################################################################
@@ -440,6 +457,9 @@
      1  SampleNewStyleClass.__init__
      1  SampleNewStyleClass.double
      1  SampleNewStyleClass.get
+     1  SampleNewStyleClass.nesting_in_functions
+     1  SampleNewStyleClass.nesting_in_functions.<nested>.NestedClass
+     1  SampleNewStyleClass.nesting_in_functions.<nested>.nested_function
 
 Finding Tests in Modules
 ~~~~~~~~~~~~~~~~~~~~~~~~