diff --git a/hw/ppc/pegasos2.c b/hw/ppc/pegasos2.c
index 298e6b93e2..d45008ac71 100644
--- a/hw/ppc/pegasos2.c
+++ b/hw/ppc/pegasos2.c
@@ -449,6 +449,11 @@ static target_ulong pegasos2_rtas(PowerPCCPU *cpu, Pegasos2MachineState *pm,
     }
 }
 
+static bool pegasos2_cpu_in_nested(PowerPCCPU *cpu)
+{
+    return false;
+}
+
 static void pegasos2_hypercall(PPCVirtualHypervisor *vhyp, PowerPCCPU *cpu)
 {
     Pegasos2MachineState *pm = PEGASOS2_MACHINE(vhyp);
@@ -504,6 +509,7 @@ static void pegasos2_machine_class_init(ObjectClass *oc, void *data)
     mc->default_ram_id = "pegasos2.ram";
     mc->default_ram_size = 512 * MiB;
 
+    vhc->cpu_in_nested = pegasos2_cpu_in_nested;
     vhc->hypercall = pegasos2_hypercall;
     vhc->cpu_exec_enter = vhyp_nop;
     vhc->cpu_exec_exit = vhyp_nop;
diff --git a/hw/ppc/spapr.c b/hw/ppc/spapr.c
index 4fdff12a96..51ba8615f2 100644
--- a/hw/ppc/spapr.c
+++ b/hw/ppc/spapr.c
@@ -4472,6 +4472,11 @@ PowerPCCPU *spapr_find_cpu(int vcpu_id)
     return NULL;
 }
 
+static bool spapr_cpu_in_nested(PowerPCCPU *cpu)
+{
+    return false;
+}
+
 static void spapr_cpu_exec_enter(PPCVirtualHypervisor *vhyp, PowerPCCPU *cpu)
 {
     SpaprCpuState *spapr_cpu = spapr_cpu_state(cpu);
@@ -4580,6 +4585,7 @@ static void spapr_machine_class_init(ObjectClass *oc, void *data)
     fwc->get_dev_path = spapr_get_fw_dev_path;
     nc->nmi_monitor_handler = spapr_nmi;
     smc->phb_placement = spapr_phb_placement;
+    vhc->cpu_in_nested = spapr_cpu_in_nested;
     vhc->hypercall = emulate_spapr_hypercall;
     vhc->hpt_mask = spapr_hpt_mask;
     vhc->map_hptes = spapr_map_hptes;
diff --git a/target/ppc/cpu.h b/target/ppc/cpu.h
index c79ae74f10..2baa750729 100644
--- a/target/ppc/cpu.h
+++ b/target/ppc/cpu.h
@@ -1311,6 +1311,8 @@ PowerPCCPUClass *ppc_cpu_get_family_class(PowerPCCPUClass *pcc);
 #ifndef CONFIG_USER_ONLY
 struct PPCVirtualHypervisorClass {
     InterfaceClass parent;
+    bool (*cpu_in_nested)(PowerPCCPU *cpu);
+    void (*deliver_hv_excp)(PowerPCCPU *cpu, int excp);
     void (*hypercall)(PPCVirtualHypervisor *vhyp, PowerPCCPU *cpu);
     hwaddr (*hpt_mask)(PPCVirtualHypervisor *vhyp);
     const ppc_hash_pte64_t *(*map_hptes)(PPCVirtualHypervisor *vhyp,
@@ -1330,6 +1332,11 @@ struct PPCVirtualHypervisorClass {
 #define TYPE_PPC_VIRTUAL_HYPERVISOR "ppc-virtual-hypervisor"
 DECLARE_OBJ_CHECKERS(PPCVirtualHypervisor, PPCVirtualHypervisorClass,
                      PPC_VIRTUAL_HYPERVISOR, TYPE_PPC_VIRTUAL_HYPERVISOR)
+
+static inline bool vhyp_cpu_in_nested(PowerPCCPU *cpu)
+{
+    return PPC_VIRTUAL_HYPERVISOR_GET_CLASS(cpu->vhyp)->cpu_in_nested(cpu);
+}
 #endif /* CONFIG_USER_ONLY */
 
 void ppc_cpu_dump_state(CPUState *cpu, FILE *f, int flags);
diff --git a/target/ppc/excp_helper.c b/target/ppc/excp_helper.c
index 7499fa187f..f44b9da2a5 100644
--- a/target/ppc/excp_helper.c
+++ b/target/ppc/excp_helper.c
@@ -1280,6 +1280,18 @@ static void powerpc_excp_booke(PowerPCCPU *cpu, int excp)
     powerpc_set_excp_state(cpu, vector, new_msr);
 }
 
+/*
+ * When running a nested HV guest under vhyp, external interrupts are
+ * delivered as HVIRT.
+ */
+static bool books_vhyp_promotes_external_to_hvirt(PowerPCCPU *cpu)
+{
+    if (cpu->vhyp) {
+        return vhyp_cpu_in_nested(cpu);
+    }
+    return false;
+}
+
 #ifdef TARGET_PPC64
 /*
  * When running under vhyp, hcalls are always intercepted and sent to the
@@ -1288,7 +1300,21 @@ static void powerpc_excp_booke(PowerPCCPU *cpu, int excp)
 static bool books_vhyp_handles_hcall(PowerPCCPU *cpu)
 {
     if (cpu->vhyp) {
-        return true;
+        return !vhyp_cpu_in_nested(cpu);
+    }
+    return false;
+}
+
+/*
+ * When running a nested KVM HV guest under vhyp, HV exceptions are not
+ * delivered to the guest (because there is no concept of HV support), but
+ * rather they are sent tothe vhyp to exit from the L2 back to the L1 and
+ * return from the H_ENTER_NESTED hypercall.
+ */
+static bool books_vhyp_handles_hv_excp(PowerPCCPU *cpu)
+{
+    if (cpu->vhyp) {
+        return vhyp_cpu_in_nested(cpu);
     }
     return false;
 }
@@ -1541,12 +1567,6 @@ static void powerpc_excp_books(PowerPCCPU *cpu, int excp)
         break;
     }
 
-    /* Sanity check */
-    if (!(env->msr_mask & MSR_HVB) && srr0 == SPR_HSRR0) {
-        cpu_abort(cs, "Trying to deliver HV exception (HSRR) %d with "
-                  "no HV support\n", excp);
-    }
-
     /*
      * Sort out endianness of interrupt, this differs depending on the
      * CPU, the HV mode, etc...
@@ -1565,10 +1585,26 @@ static void powerpc_excp_books(PowerPCCPU *cpu, int excp)
         env->spr[srr1] = msr;
     }
 
-    /* This can update new_msr and vector if AIL applies */
-    ppc_excp_apply_ail(cpu, excp, msr, &new_msr, &vector);
+    if ((new_msr & MSR_HVB) && books_vhyp_handles_hv_excp(cpu)) {
+        PPCVirtualHypervisorClass *vhc =
+            PPC_VIRTUAL_HYPERVISOR_GET_CLASS(cpu->vhyp);
+        /* Deliver interrupt to L1 by returning from the H_ENTER_NESTED call */
+        vhc->deliver_hv_excp(cpu, excp);
 
-    powerpc_set_excp_state(cpu, vector, new_msr);
+        powerpc_reset_excp_state(cpu);
+
+    } else {
+        /* Sanity check */
+        if (!(env->msr_mask & MSR_HVB) && srr0 == SPR_HSRR0) {
+            cpu_abort(cs, "Trying to deliver HV exception (HSRR) %d with "
+                      "no HV support\n", excp);
+        }
+
+        /* This can update new_msr and vector if AIL applies */
+        ppc_excp_apply_ail(cpu, excp, msr, &new_msr, &vector);
+
+        powerpc_set_excp_state(cpu, vector, new_msr);
+    }
 }
 #else
 static inline void powerpc_excp_books(PowerPCCPU *cpu, int excp)
@@ -1688,7 +1724,11 @@ static void ppc_hw_interrupt(CPUPPCState *env)
         /* HEIC blocks delivery to the hypervisor */
         if ((async_deliver && !(heic && msr_hv && !msr_pr)) ||
             (env->has_hv_mode && msr_hv == 0 && !lpes0)) {
-            powerpc_excp(cpu, POWERPC_EXCP_EXTERNAL);
+            if (books_vhyp_promotes_external_to_hvirt(cpu)) {
+                powerpc_excp(cpu, POWERPC_EXCP_HVIRT);
+            } else {
+                powerpc_excp(cpu, POWERPC_EXCP_EXTERNAL);
+            }
             return;
         }
     }
@@ -1798,6 +1838,8 @@ void ppc_cpu_do_fwnmi_machine_check(CPUState *cs, target_ulong vector)
         msr |= (1ULL << MSR_LE);
     }
 
+    /* Anything for nested required here? MSR[HV] bit? */
+
     powerpc_set_excp_state(cpu, vector, msr);
 }
 
diff --git a/target/ppc/mmu-radix64.c b/target/ppc/mmu-radix64.c
index 9c557c6de9..67c38f065b 100644
--- a/target/ppc/mmu-radix64.c
+++ b/target/ppc/mmu-radix64.c
@@ -355,12 +355,19 @@ static int ppc_radix64_partition_scoped_xlate(PowerPCCPU *cpu,
 }
 
 /*
- * The spapr vhc has a flat partition scope provided by qemu memory.
+ * The spapr vhc has a flat partition scope provided by qemu memory when
+ * not nested.
+ *
+ * When running a nested guest, the addressing is 2-level radix on top of the
+ * vhc memory, so it works practically identically to the bare metal 2-level
+ * radix. So that code is selected directly. A cleaner and more flexible nested
+ * hypervisor implementation would allow the vhc to provide a ->nested_xlate()
+ * function but that is not required for the moment.
  */
 static bool vhyp_flat_addressing(PowerPCCPU *cpu)
 {
     if (cpu->vhyp) {
-        return true;
+        return !vhyp_cpu_in_nested(cpu);
     }
     return false;
 }