diff --git a/bin/pyenv-sh-deactivate b/bin/pyenv-sh-deactivate
index 7638de9..0be5bc3 100755
--- a/bin/pyenv-sh-deactivate
+++ b/bin/pyenv-sh-deactivate
@@ -9,6 +9,10 @@
 set -e
 [ -n "$PYENV_DEBUG" ] && set -x
 
+if [ -z "${PYENV_ROOT}" ]; then
+  PYENV_ROOT="$(pyenv-root)"
+fi
+
 unset FORCE
 unset QUIET
 unset VERBOSE
@@ -48,8 +52,8 @@ fi
 shell="$(basename "${PYENV_SHELL:-$SHELL}")"
 prefix="${VIRTUAL_ENV}"
 
-if [[ "${prefix}" != "${prefix%/envs/*}" ]]; then
-  venv="$(basename "${prefix%/envs/*}")/envs/${prefix##*/}"
+if [[ "${prefix%/*/envs/*}" == "${PYENV_ROOT}/versions" ]]; then
+  venv="${prefix#${PYENV_ROOT}/versions/}"
 else
   venv="${prefix##*/}"
 fi
diff --git a/bin/pyenv-virtualenv b/bin/pyenv-virtualenv
index 2af1567..05a7b12 100755
--- a/bin/pyenv-virtualenv
+++ b/bin/pyenv-virtualenv
@@ -11,13 +11,13 @@
 
 PYENV_VIRTUALENV_VERSION="20151103"
 
+set -e
+[ -n "$PYENV_DEBUG" ] && set -x
+
 if [ -z "${PYENV_ROOT}" ]; then
   PYENV_ROOT="$(pyenv-root)"
 fi
 
-set -e
-[ -n "$PYENV_DEBUG" ] && set -x
-
 # Provide pyenv completions
 if [ "$1" = "--complete" ]; then
   exec pyenv-versions --bare
@@ -328,11 +328,6 @@ if [ ! -d "${PREFIX}" ]; then
   exit 1
 fi
 
-if [[ "${PREFIX}" != "${PREFIX%/envs/*}" ]]; then
-  echo "pyenv-virtualenv: nested virtualenv is not supported." 1>&2
-  exit 1
-fi
-
 if [ -z "$TMPDIR" ]; then
   TMP="/tmp"
 else
@@ -343,11 +338,16 @@ fi
 if [[ "${VERSION_NAME%/envs/*}" == "system" ]]; then
   VIRTUALENV_NAME="${VIRTUALENV_NAME##*/}"
 else
-  VIRTUALENV_NAME="${VERSION_NAME}/envs/${VIRTUALENV_NAME##*/}"
+  VIRTUALENV_PREFIX="$(pyenv-virtualenv-prefix 2>/dev/null || true)"
+  if [[ "${VIRTUALENV_PREFIX%/*}" == "${PYENV_ROOT}/versions" ]]; then
+    VIRTUALENV_NAME="${VIRTUALENV_PREFIX#${PYENV_ROOT}/versions/}/envs/${VIRTUALENV_NAME##*/}"
+  else
+    VIRTUALENV_NAME="${VERSION_NAME}/envs/${VIRTUALENV_NAME##*/}"
+  fi
 fi
 
 VIRTUALENV_PATH="${PYENV_ROOT}/versions/${VIRTUALENV_NAME}"
-if [[ "${VIRTUALENV_PATH}" != "${VIRTUALENV_PATH%/envs/*}" ]]; then
+if [[ "${VIRTUALENV_PATH/*/envs/*}" != "${PYENV_ROOT}/versions" ]]; then
   COMPAT_VIRTUALENV_PATH="${PYENV_ROOT}/versions/${VIRTUALENV_NAME##*/}"
 fi
 
diff --git a/bin/pyenv-virtualenv-delete b/bin/pyenv-virtualenv-delete
index 90900f5..99d23d4 100755
--- a/bin/pyenv-virtualenv-delete
+++ b/bin/pyenv-virtualenv-delete
@@ -13,6 +13,10 @@
 set -e
 [ -n "$PYENV_DEBUG" ] && set -x
 
+if [ -z "${PYENV_ROOT}" ]; then
+  PYENV_ROOT="$(pyenv-root)"
+fi
+
 # Provide pyenv completions
 if [ "$1" = "--complete" ]; then
   exec pyenv virtualenvs --bare
@@ -63,7 +67,7 @@ if [[ "${DEFINITION}" != "${DEFINITION%/envs/*}" ]]; then
 else
   if [ -L "${COMPAT_PREFIX}" ]; then
     PREFIX="$(resolve_link "${COMPAT_PREFIX}" 2>/dev/null || true)"
-    if [[ "${PREFIX}" == "${PREFIX%/envs/*}" ]]; then
+    if [[ "${PREFIX%/*/envs/*}" != "${PYENV_ROOT}/versions" ]]; then
       echo "pyenv-virtualenv: \`${COMPAT_PREFIX}' is a symlink for unknown location." 1>&2
       exit 1
     fi
diff --git a/test/conda.bats b/test/conda.bats
index 0eb79d6..3c6ef02 100644
--- a/test/conda.bats
+++ b/test/conda.bats
@@ -25,6 +25,7 @@ unstub_pyenv() {
   setup_conda "${PYENV_VERSION}"
   stub_pyenv "${PYENV_VERSION}"
   stub pyenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
+  stub pyenv-virtualenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
   stub pyenv-exec "conda * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "python -s -m ensurepip : true"
 
@@ -37,6 +38,7 @@ rehashed
 OUT
 
   unstub_pyenv
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   teardown_pyvenv "miniconda3-3.16.0"
 }
@@ -46,6 +48,7 @@ OUT
   setup_conda "${PYENV_VERSION}"
   stub_pyenv "${PYENV_VERSION}"
   stub pyenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
+  stub pyenv-virtualenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
   stub pyenv-exec "conda * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "python -s -m ensurepip : true"
 
@@ -58,6 +61,7 @@ rehashed
 OUT
 
   unstub_pyenv
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   teardown_pyvenv "miniconda3-3.16.0"
 }
@@ -67,6 +71,7 @@ OUT
   setup_conda "${PYENV_VERSION}"
   stub_pyenv "${PYENV_VERSION}"
   stub pyenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
+  stub pyenv-virtualenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
   stub pyenv-exec "conda * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "python -s -m ensurepip : true"
 
@@ -79,6 +84,7 @@ rehashed
 OUT
 
   unstub_pyenv
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   teardown_pyvenv "miniconda3-3.16.0"
 }
diff --git a/test/envs.bats b/test/envs.bats
new file mode 100644
index 0000000..4da2a75
--- /dev/null
+++ b/test/envs.bats
@@ -0,0 +1,46 @@
+#!/usr/bin/env bats
+
+load test_helper
+
+setup() {
+  export PYENV_ROOT="${TMP}/envs/pyenv"
+}
+
+stub_pyenv() {
+  stub pyenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
+  stub pyenv-hooks "virtualenv : echo"
+  stub pyenv-rehash " : echo rehashed"
+}
+
+unstub_pyenv() {
+  unstub pyenv-prefix
+  unstub pyenv-hooks
+  unstub pyenv-rehash
+}
+
+@test "path should be handled properly even if there is 'envs' in PYENV_ROOT" {
+  export PYENV_VERSION="3.4.1"
+  setup_pyvenv "3.4.1"
+  stub_pyenv "${PYENV_VERSION}"
+  stub pyenv-version-name "echo '${PYENV_VERSION}'"
+  stub pyenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
+  stub pyenv-virtualenv-prefix " : false"
+  stub pyenv-exec "pyvenv * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\";mkdir -p \${PYENV_ROOT}/versions/3.4.1/envs/venv/bin"
+  stub pyenv-exec "python -s -m ensurepip : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\";touch \${PYENV_ROOT}/versions/3.4.1/envs/venv/bin/pip"
+
+  run pyenv-virtualenv venv
+
+  assert_success
+  assert_output <<OUT
+PYENV_VERSION=3.4.1 pyvenv ${PYENV_ROOT}/versions/3.4.1/envs/venv
+PYENV_VERSION=3.4.1/envs/venv python -s -m ensurepip
+rehashed
+OUT
+  assert [ -e "${PYENV_ROOT}/versions/3.4.1/envs/venv/bin/pip" ]
+
+  unstub_pyenv
+  unstub pyenv-version-name
+  unstub pyenv-virtualenv-prefix
+  unstub pyenv-exec
+  teardown_pyvenv "3.4.1"
+}
diff --git a/test/pip.bats b/test/pip.bats
index e1af4fd..67381c1 100644
--- a/test/pip.bats
+++ b/test/pip.bats
@@ -25,6 +25,7 @@ unstub_pyenv() {
   setup_pyvenv "3.4.1"
   stub_pyenv "${PYENV_VERSION}"
   stub pyenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
+  stub pyenv-virtualenv-prefix " : false"
   stub pyenv-exec "pyvenv * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\";mkdir -p \${PYENV_ROOT}/versions/3.4.1/envs/venv/bin"
   stub pyenv-exec "python -s -m ensurepip : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\";touch \${PYENV_ROOT}/versions/3.4.1/envs/venv/bin/pip"
 
@@ -39,6 +40,7 @@ OUT
   assert [ -e "${PYENV_ROOT}/versions/3.4.1/envs/venv/bin/pip" ]
 
   unstub_pyenv
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   teardown_pyvenv "3.4.1"
 }
@@ -48,6 +50,7 @@ OUT
   setup_pyvenv "3.3.5"
   stub_pyenv "${PYENV_VERSION}"
   stub pyenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
+  stub pyenv-virtualenv-prefix " : false"
   stub pyenv-exec "pyvenv * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\";mkdir -p \${PYENV_ROOT}/versions/3.3.5/envs/venv/bin"
   stub pyenv-exec "python -s -m ensurepip : false"
   stub pyenv-exec "python -s */get-pip.py : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\";touch \${PYENV_ROOT}/versions/3.3.5/envs/venv/bin/pip"
@@ -65,6 +68,7 @@ OUT
   assert [ -e "${PYENV_ROOT}/versions/3.3.5/envs/venv/bin/pip" ]
 
   unstub_pyenv
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   teardown_pyvenv "3.3.5"
 }
diff --git a/test/pyvenv.bats b/test/pyvenv.bats
index 32bde99..7a23078 100644
--- a/test/pyvenv.bats
+++ b/test/pyvenv.bats
@@ -25,6 +25,7 @@ unstub_pyenv() {
   setup_pyvenv "3.4.1"
   stub_pyenv "${PYENV_VERSION}"
   stub pyenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
+  stub pyenv-virtualenv-prefix " : false"
   stub pyenv-exec "pyvenv * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "python -s -m ensurepip : true"
 
@@ -37,6 +38,7 @@ rehashed
 OUT
 
   unstub_pyenv
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   teardown_pyvenv "3.4.1"
 }
@@ -47,6 +49,7 @@ OUT
   create_executable "3.4.1" "virtualenv"
   stub_pyenv "${PYENV_VERSION}"
   stub pyenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
+  stub pyenv-virtualenv-prefix " : false"
   stub pyenv-exec "virtualenv * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "python -s -m ensurepip : true"
 
@@ -59,6 +62,7 @@ rehashed
 OUT
 
   unstub_pyenv
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   teardown_pyvenv "3.4.1"
 }
@@ -68,6 +72,7 @@ OUT
   setup_version "3.2.1"
   stub_pyenv "${PYENV_VERSION}"
   stub pyenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
+  stub pyenv-virtualenv-prefix " : false"
   stub pyenv-exec "pip install virtualenv : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "virtualenv * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "python -s -m ensurepip : false"
@@ -85,6 +90,7 @@ rehashed
 OUT
 
   unstub_pyenv
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   unstub curl
   teardown_version "3.2.1"
@@ -95,6 +101,7 @@ OUT
   setup_pyvenv "3.4.1"
   stub_pyenv "${PYENV_VERSION}"
   stub pyenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
+  stub pyenv-virtualenv-prefix " : false"
   stub pyenv-exec "pip install virtualenv : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "virtualenv * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "python -s -m ensurepip : true"
@@ -109,6 +116,7 @@ OUT
   assert_success
 
   unstub_pyenv
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   teardown_pyvenv "3.4.1"
 }
@@ -118,6 +126,7 @@ OUT
   setup_pyvenv "3.4.1"
   stub_pyenv "${PYENV_VERSION}"
   stub pyenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
+  stub pyenv-virtualenv-prefix " : false"
   stub pyenv-exec "pip install virtualenv : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "virtualenv * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "python -s -m ensurepip : true"
@@ -132,6 +141,7 @@ OUT
   assert_success
 
   unstub_pyenv
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   teardown_pyvenv "3.4.1"
 }
@@ -141,6 +151,7 @@ OUT
   setup_version "3.2.1"
   stub_pyenv "${PYENV_VERSION}"
   stub pyenv-prefix " : echo '${PYENV_ROOT}/versions/${PYENV_VERSION}'"
+  stub pyenv-virtualenv-prefix " : false"
   stub pyenv-exec "pip install virtualenv : echo PIP_REQUIRE_VENV=\${PIP_REQUIRE_VENV} PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "virtualenv * : echo PIP_REQUIRE_VENV=\${PIP_REQUIRE_VENV} PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "python -s -m ensurepip : false"
@@ -158,6 +169,7 @@ rehashed
 OUT
 
   unstub_pyenv
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   unstub curl
   teardown_version "3.2.1"
diff --git a/test/virtualenv.bats b/test/virtualenv.bats
index 1baba15..7567deb 100644
--- a/test/virtualenv.bats
+++ b/test/virtualenv.bats
@@ -25,6 +25,7 @@ unstub_pyenv() {
 @test "create virtualenv from given version" {
   export PYENV_VERSION="3.2.1"
   stub_pyenv "${PYENV_VERSION}"
+  stub pyenv-virtualenv-prefix " : false"
   stub pyenv-exec "virtualenv * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "python -s -m ensurepip : false"
   stub pyenv-exec "python -s */get-pip.py : true"
@@ -40,6 +41,7 @@ rehashed
 OUT
 
   unstub_pyenv
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   unstub curl
 }
@@ -48,6 +50,7 @@ OUT
   export PYENV_VERSION="3.2.1"
   stub_pyenv "${PYENV_VERSION}"
   stub pyenv-version-name "echo \${PYENV_VERSION}"
+  stub pyenv-virtualenv-prefix " : false"
   stub pyenv-exec "virtualenv * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "python -s -m ensurepip : false"
   stub pyenv-exec "python -s */get-pip.py : true"
@@ -64,6 +67,7 @@ OUT
 
   unstub_pyenv
   unstub pyenv-version-name
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   unstub curl
 }
@@ -72,6 +76,7 @@ OUT
   export PYENV_VERSION="3.2.1"
   stub_pyenv "${PYENV_VERSION}"
   stub pyenv-version-name "echo \${PYENV_VERSION}"
+  stub pyenv-virtualenv-prefix " : false"
   stub pyenv-exec "virtualenv * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "python -s -m ensurepip : false"
   stub pyenv-exec "python -s */get-pip.py : true"
@@ -88,6 +93,7 @@ OUT
 
   unstub_pyenv
   unstub pyenv-version-name
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   unstub curl
 }
@@ -96,6 +102,7 @@ OUT
   export PYENV_VERSION="3.2.1"
   stub_pyenv "${PYENV_VERSION}"
   stub pyenv-version-name "echo \${PYENV_VERSION}"
+  stub pyenv-virtualenv-prefix " : false"
   stub pyenv-exec "virtualenv * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "python -s -m ensurepip : false"
   stub pyenv-exec "python -s */get-pip.py : true"
@@ -112,6 +119,7 @@ OUT
 
   unstub_pyenv
   unstub pyenv-version-name
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   unstub curl
 }
@@ -155,6 +163,7 @@ OUT
 @test "slash allowed if it is the long name of the virtualenv" {
   export PYENV_VERSION="3.2.1"
   stub_pyenv "${PYENV_VERSION}"
+  stub pyenv-virtualenv-prefix " : false"
   stub pyenv-exec "virtualenv * : echo PYENV_VERSION=\${PYENV_VERSION} \"\$@\""
   stub pyenv-exec "python -s -m ensurepip : false"
   stub pyenv-exec "python -s */get-pip.py : true"
@@ -170,6 +179,7 @@ rehashed
 OUT
 
   unstub_pyenv
+  unstub pyenv-virtualenv-prefix
   unstub pyenv-exec
   unstub curl
 }