diff --git a/test/integration/suites/core/nested_test.go b/test/integration/suites/core/nested_test.go
new file mode 100644
index 00000000..51d22baf
--- /dev/null
+++ b/test/integration/suites/core/nested_test.go
@@ -0,0 +1,277 @@
+// Copyright 2025 The Kube Resource Orchestrator Authors.
+//
+// Licensed under the Apache License, Version 2.0 (the "License"). You may
+// not use this file except in compliance with the License. A copy of the
+// License is located at
+//
+//    http://www.apache.org/licenses/LICENSE-2.0
+//
+// or in the "license" file accompanying this file. This file is distributed
+// on an "AS IS" BASIS, WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either
+// express or implied. See the License for the specific language governing
+// permissions and limitations under the License.
+
+package core_test
+
+import (
+	"context"
+	"fmt"
+	"time"
+
+	. "github.com/onsi/ginkgo/v2"
+	. "github.com/onsi/gomega"
+	"k8s.io/apimachinery/pkg/api/errors"
+	"k8s.io/apimachinery/pkg/types"
+	"k8s.io/apimachinery/pkg/util/rand"
+
+	corev1 "k8s.io/api/core/v1"
+	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
+	"k8s.io/apimachinery/pkg/apis/meta/v1/unstructured"
+
+	krov1alpha1 "github.com/kro-run/kro/api/v1alpha1"
+	"github.com/kro-run/kro/pkg/testutil/generator"
+)
+
+var _ = Describe("Nested ResourceGraphDefinition", func() {
+	var (
+		ctx       context.Context
+		namespace string
+	)
+
+	BeforeEach(func() {
+		ctx = context.Background()
+		namespace = fmt.Sprintf("test-%s", rand.String(5))
+		// Create namespace
+		Expect(env.Client.Create(ctx, &corev1.Namespace{
+			ObjectMeta: metav1.ObjectMeta{
+				Name: namespace,
+			},
+		})).To(Succeed())
+	})
+
+	It("should handle nested ResourceGraphDefinition lifecycle", func() {
+		ctx := context.Background()
+		namespace := fmt.Sprintf("test-%s", rand.String(5))
+
+		// Create namespace
+		ns := &corev1.Namespace{
+			ObjectMeta: metav1.ObjectMeta{
+				Name: namespace,
+			},
+		}
+		Expect(env.Client.Create(ctx, ns)).To(Succeed())
+
+		// Create parent ResourceGraphDefinition
+		rg, genInstance := nestedResourceGraphDefinition("test-nested-rg")
+		Expect(env.Client.Create(ctx, rg)).To(Succeed())
+
+		// Wait for parent ResourceGraphDefinition to be ready
+		Eventually(func(g Gomega) {
+			err := env.Client.Get(ctx, types.NamespacedName{
+				Name: rg.Name,
+			}, rg)
+			g.Expect(err).ToNot(HaveOccurred())
+			g.Expect(rg.Status.State).To(Equal(krov1alpha1.ResourceGraphDefinitionStateActive))
+		}, 30*time.Second, time.Second).Should(Succeed())
+
+		// Create instance
+		instance := genInstance(namespace, "test-string", "string", "10")
+		Expect(env.Client.Create(ctx, instance)).To(Succeed())
+
+		// Wait for nested ResourceGraphDefinition to be created and ready
+		var nestedRG krov1alpha1.ResourceGraphDefinition
+		Eventually(func(g Gomega) {
+			err := env.Client.Get(ctx, types.NamespacedName{
+				Name: "rg-string",
+			}, &nestedRG)
+			g.Expect(err).ToNot(HaveOccurred())
+			g.Expect(nestedRG.Status.State).To(Equal(krov1alpha1.ResourceGraphDefinitionStateActive))
+		}, 30*time.Second, time.Second).Should(Succeed())
+
+		// Verify instance status reflects nested ResourceGraphDefinition
+		Eventually(func(g Gomega) {
+			err := env.Client.Get(ctx, types.NamespacedName{
+				Name:      instance.GetName(),
+				Namespace: namespace,
+			}, instance)
+			g.Expect(err).ToNot(HaveOccurred())
+		}, 30*time.Second, time.Second).Should(Succeed())
+
+		// Check instance status.State
+		instanceStatus, found, _ := unstructured.NestedMap(instance.Object, "status", "state")
+		Expect(found).To(BeTrue())
+		Expect(instanceStatus).To(Equal("Active"))
+
+		// Delete instance
+		Expect(env.Client.Delete(ctx, instance)).To(Succeed())
+
+		// Verify nested ResourceGraphDefinition is deleted
+		Eventually(func() bool {
+			err := env.Client.Get(ctx, types.NamespacedName{
+				Name: "rg-integer",
+			}, &nestedRG)
+			return errors.IsNotFound(err)
+		}, 30*time.Second, time.Second).Should(BeTrue())
+
+		// Delete parent ResourceGraphDefinition
+		Expect(env.Client.Delete(ctx, rg)).To(Succeed())
+
+		// Cleanup namespace
+		Expect(env.Client.Delete(ctx, ns)).To(Succeed())
+	})
+
+	It("should dynamically create RGDs with different schema field types", func() {
+		ctx := context.Background()
+		namespace := fmt.Sprintf("test-%s", rand.String(5))
+
+		// Create namespace
+		ns := &corev1.Namespace{
+			ObjectMeta: metav1.ObjectMeta{
+				Name: namespace,
+			},
+		}
+		Expect(env.Client.Create(ctx, ns)).To(Succeed())
+
+		// Create parent ResourceGraphDefinition
+		rg, genInstance := nestedResourceGraphDefinition("test-multi-rg")
+		Expect(env.Client.Create(ctx, rg)).To(Succeed())
+
+		// Wait for parent ResourceGraphDefinition to be ready
+		Eventually(func(g Gomega) {
+			err := env.Client.Get(ctx, types.NamespacedName{
+				Name: rg.Name,
+			}, rg)
+			g.Expect(err).ToNot(HaveOccurred())
+			g.Expect(rg.Status.State).To(Equal(krov1alpha1.ResourceGraphDefinitionStateActive))
+		}, 30*time.Second, time.Second).Should(Succeed())
+
+		// Create instances with different types
+		testCases := []struct {
+			name       string
+			typeVal    string
+			defaultVal string
+		}{
+			{"test-integer", "integer", "10"},
+			{"test-string", "string", "default"},
+			{"test-boolean", "boolean", "true"},
+		}
+
+		// Create all instances
+		for _, t := range testCases {
+			instance := genInstance(namespace, t.name, t.typeVal, t.defaultVal)
+			Expect(env.Client.Create(ctx, instance)).To(Succeed())
+		}
+
+		// Wait for all nested ResourceGraphDefinitions and verify status
+		for _, t := range testCases {
+			// Wait for nested ResourceGraphDefinition
+			var nestedRG krov1alpha1.ResourceGraphDefinition
+			Eventually(func(g Gomega) {
+				err := env.Client.Get(ctx, types.NamespacedName{
+					Name: fmt.Sprintf("rg-%s", t.typeVal),
+				}, &nestedRG)
+				g.Expect(err).ToNot(HaveOccurred())
+				g.Expect(nestedRG.Status.State).To(Equal(krov1alpha1.ResourceGraphDefinitionStateActive))
+			}, 30*time.Second, time.Second).Should(Succeed())
+
+			// Verify instance status
+			Eventually(func(g Gomega) {
+				instance := &unstructured.Unstructured{
+					Object: map[string]interface{}{
+						"apiVersion": fmt.Sprintf("%s/%s", krov1alpha1.KroDomainName, "v1alpha1"),
+						"kind":       "NestedRGD",
+					},
+				}
+				err := env.Client.Get(ctx, types.NamespacedName{
+					Name:      t.name,
+					Namespace: namespace,
+				}, instance)
+				g.Expect(err).ToNot(HaveOccurred())
+
+				// Check instance status.State
+				instanceStatus, found, _ := unstructured.NestedMap(instance.Object, "status", "state")
+				Expect(found).To(BeTrue())
+				Expect(instanceStatus).To(Equal("Active"))
+
+			}, 30*time.Second, time.Second).Should(Succeed())
+		}
+
+		// Delete all instances
+		for _, t := range testCases {
+			instance := genInstance(namespace, t.name, t.typeVal, t.defaultVal)
+			Expect(env.Client.Delete(ctx, instance)).To(Succeed())
+		}
+
+		// Verify all nested ResourceGraphDefinitions are deleted
+		for _, t := range testCases {
+			Eventually(func() bool {
+				var nestedRG krov1alpha1.ResourceGraphDefinition
+				err := env.Client.Get(ctx, types.NamespacedName{
+					Name: fmt.Sprintf("rg-%s", t.typeVal),
+				}, &nestedRG)
+				return errors.IsNotFound(err)
+			}, 30*time.Second, time.Second).Should(BeTrue())
+		}
+
+		// Delete parent ResourceGraphDefinition
+		Expect(env.Client.Delete(ctx, rg)).To(Succeed())
+
+		// Cleanup namespace
+		Expect(env.Client.Delete(ctx, ns)).To(Succeed())
+	})
+})
+
+// nestedResourceGraphDefinition creates a ResourceGraphDefinition inception
+func nestedResourceGraphDefinition(name string) (
+	*krov1alpha1.ResourceGraphDefinition,
+	func(namespace, name string, typeVal string, defaultVal string) *unstructured.Unstructured,
+) {
+	rg := generator.NewResourceGraphDefinition(name,
+		generator.WithSchema(
+			"NestedRGD", "v1alpha1",
+			map[string]interface{}{
+				"type":    "string",
+				"default": "string",
+			},
+			map[string]interface{}{},
+		),
+		generator.WithResource("nested", map[string]interface{}{
+			"apiVersion": "kro.run/v1alpha1",
+			"kind":       "ResourceGraphDefinition",
+			"metadata": map[string]interface{}{
+				"name": "rg-${schema.spec.type}",
+			},
+			"spec": map[string]interface{}{
+				"schema": map[string]interface{}{
+					"apiVersion": "v1alpha1",
+					"kind":       "NestedRGD${schema.spec.type}",
+					"spec": map[string]interface{}{
+						"name": "string",
+						"somefield": map[string]interface{}{
+							"nested": "${schema.spec.type} | default=${schema.spec.default}",
+						},
+					},
+				},
+			},
+		}, nil, nil),
+	)
+
+	instanceGen := func(namespace, name string, typeVal string, defaultVal string) *unstructured.Unstructured {
+		return &unstructured.Unstructured{
+			Object: map[string]interface{}{
+				"apiVersion": fmt.Sprintf("%s/%s", krov1alpha1.KroDomainName, "v1alpha1"),
+				"kind":       "NestedRGD",
+				"metadata": map[string]interface{}{
+					"name":      name,
+					"namespace": namespace,
+				},
+				"spec": map[string]interface{}{
+					"type":    typeVal,
+					"default": defaultVal,
+				},
+			},
+		}
+	}
+
+	return rg, instanceGen
+}