diff --git a/macropy/core/macros.py b/macropy/core/macros.py
index 259356b4..67c5c529 100644
--- a/macropy/core/macros.py
+++ b/macropy/core/macros.py
@@ -178,6 +178,7 @@ def detect_macro(self, in_tree):
                                                in_tree.body, call_args,
                                                {'target': wi.optional_vars},
                                                name)
+                    in_tree.body = new_tree
 
             if new_tree:
                 if isinstance(new_tree, ast.expr):
diff --git a/macropy/core/test/macros/basic_block.py b/macropy/core/test/macros/basic_block.py
index bb437757..1beb4db6 100644
--- a/macropy/core/test/macros/basic_block.py
+++ b/macropy/core/test/macros/basic_block.py
@@ -1,7 +1,19 @@
-from macropy.core.test.macros.basic_block_macro import macros, my_macro
+from macropy.core.test.macros.basic_block_macro import macros, my_macro, my_nested_outer, my_nested_inner
 
 def run():
     x = 10
     with my_macro as y:
         x = x + 1
-    return x
\ No newline at end of file
+
+    z = 10
+    with my_nested_outer:
+        with my_nested_inner:
+            z = z + 1  # should get replaced by z = z * 2
+    assert z == 80
+
+    z = 10
+    with my_nested_inner, my_nested_outer:
+        z = z + 1
+    assert z == 80
+
+    return x
diff --git a/macropy/core/test/macros/basic_block_macro.py b/macropy/core/test/macros/basic_block_macro.py
index ff42b534..8395fe48 100644
--- a/macropy/core/test/macros/basic_block_macro.py
+++ b/macropy/core/test/macros/basic_block_macro.py
@@ -8,3 +8,12 @@ def my_macro(tree, target, **kw):
     assert macropy.core.unparse(target) == "y"
     assert macropy.core.unparse(tree).strip() == "x = (x + 1)", macropy.core.unparse(tree)
     return tree * 3
+
+@macros.block
+def my_nested_outer(tree, **kw):
+    assert macropy.core.unparse(tree).strip() == "z = (z * 2)", macropy.core.unparse(tree)
+    return tree * 3
+
+@macros.block
+def my_nested_inner(tree, **kw):  # important: generate new tree from scratch for this test
+    return [macropy.core.parse_stmt("z = z * 2")]