diff --git a/IPython/terminal/embed.py b/IPython/terminal/embed.py
index 045925c..b2f3408 100644
--- a/IPython/terminal/embed.py
+++ b/IPython/terminal/embed.py
@@ -14,6 +14,7 @@ import warnings
 from IPython.core import ultratb, compilerop
 from IPython.core.magic import Magics, magics_class, line_magic
 from IPython.core.interactiveshell import DummyMod
+from IPython.core.interactiveshell import InteractiveShell
 from IPython.terminal.interactiveshell import TerminalInteractiveShell
 from IPython.terminal.ipapp import load_default_config
 
@@ -192,7 +193,8 @@ class InteractiveShellEmbed(TerminalInteractiveShell):
         # like _ih and get_ipython() into the local namespace, but delete them
         # later.
         if local_ns is not None:
-            self.user_ns = local_ns
+            reentrant_local_ns = {k: v for (k, v) in local_ns.items() if k not in self.user_ns_hidden.keys()}
+            self.user_ns = reentrant_local_ns
             self.init_user_ns()
 
         # Compiler flags
@@ -208,8 +210,8 @@ class InteractiveShellEmbed(TerminalInteractiveShell):
         
         # now, purge out the local namespace of IPython's hidden variables.
         if local_ns is not None:
-            for name in self.user_ns_hidden:
-                local_ns.pop(name, None)
+            local_ns.update({k: v for (k, v) in self.user_ns.items() if k not in self.user_ns_hidden.keys()})
+
         
         # Restore original namespace so shell can shut down when we exit.
         self.user_module = orig_user_module
@@ -249,5 +251,28 @@ def embed(**kwargs):
         config = load_default_config()
         config.InteractiveShellEmbed = config.TerminalInteractiveShell
         kwargs['config'] = config
+    #save ps1/ps2 if defined
+    ps1 = None
+    ps2 = None
+    try:
+        ps1 = sys.ps1
+        ps2 = sys.ps2
+    except AttributeError:
+        pass
+    #save previous instance
+    saved_shell_instance = InteractiveShell._instance
+    if saved_shell_instance is not None:
+        cls = type(saved_shell_instance)
+        cls.clear_instance()
     shell = InteractiveShellEmbed.instance(**kwargs)
     shell(header=header, stack_depth=2, compile_flags=compile_flags)
+    InteractiveShellEmbed.clear_instance()
+    #restore previous instance
+    if saved_shell_instance is not None:
+        cls = type(saved_shell_instance)
+        cls.clear_instance()
+        for subclass in cls._walk_mro():
+            subclass._instance = saved_shell_instance
+    if ps1 is not None:
+        sys.ps1 = ps1
+        sys.ps2 = ps2
diff --git a/IPython/terminal/tests/test_embed.py b/IPython/terminal/tests/test_embed.py
index 70a4508..ec51316 100644
--- a/IPython/terminal/tests/test_embed.py
+++ b/IPython/terminal/tests/test_embed.py
@@ -16,11 +16,13 @@ import sys
 import nose.tools as nt
 from IPython.utils.process import process_handler
 from IPython.utils.tempdir import NamedFileInTemporaryDirectory
+from IPython.testing.decorators import skip_win32
 
 #-----------------------------------------------------------------------------
 # Tests
 #-----------------------------------------------------------------------------
 
+
 _sample_embed = b"""
 from __future__ import print_function
 import IPython
@@ -55,3 +57,69 @@ def test_ipython_embed():
             nt.assert_in('IPython', std)
         nt.assert_in('bye!', std)
 
+@skip_win32
+def test_nest_embed():
+    """test that `IPython.embed()` is nestable"""
+    from IPython.external import pexpect
+    ipy_prompt = r']:' #ansi color codes give problems matching beyond this
+
+
+    child = pexpect.spawn('%s -m IPython'%(sys.executable, ))
+    child.expect(ipy_prompt)
+    child.sendline("from __future__ import print_function")
+    child.expect(ipy_prompt)
+    child.sendline("import IPython")
+    child.expect(ipy_prompt)
+    child.sendline("ip0 = get_ipython()")
+    #enter first nested embed
+    child.sendline("IPython.embed()")
+    #skip the banner until we get to a prompt
+    try:
+        prompted = -1
+        while prompted != 0:
+            prompted = child.expect([ipy_prompt, '\r\n'])
+    except pexpect.TIMEOUT as e:
+        print(e)
+        #child.interact()
+    child.sendline("embed1 = get_ipython()"); child.expect(ipy_prompt)
+    child.sendline("print('true' if embed1 is not ip0 else 'false')")
+    assert(child.expect(['true\r\n', 'false\r\n']) == 0)
+    child.expect(ipy_prompt)
+    child.sendline("print('true' if IPython.get_ipython() is embed1 else 'false')")
+    assert(child.expect(['true\r\n', 'false\r\n']) == 0)
+    child.expect(ipy_prompt)
+    #enter second nested embed
+    child.sendline("IPython.embed()")
+    #skip the banner until we get to a prompt
+    try:
+        prompted = -1
+        while prompted != 0:
+            prompted = child.expect([ipy_prompt, '\r\n'])
+    except pexpect.TIMEOUT as e:
+        print(e)
+        #child.interact()
+    child.sendline("embed2 = get_ipython()"); child.expect(ipy_prompt)
+    child.sendline("print('true' if embed2 is not embed1 else 'false')")
+    assert(child.expect(['true\r\n', 'false\r\n']) == 0)
+    child.expect(ipy_prompt)
+    child.sendline("print('true' if embed2 is IPython.get_ipython() else 'false')")
+    assert(child.expect(['true\r\n', 'false\r\n']) == 0)
+    child.expect(ipy_prompt)
+    child.sendline('exit')
+    #back at first embed
+    child.expect(ipy_prompt)
+    child.sendline("print('true' if get_ipython() is embed1 else 'false')")
+    assert(child.expect(['true\r\n', 'false\r\n']) == 0)
+    child.expect(ipy_prompt)
+    child.sendline("print('true' if IPython.get_ipython() is embed1 else 'false')")
+    assert(child.expect(['true\r\n', 'false\r\n']) == 0)
+    child.expect(ipy_prompt)
+    child.sendline('exit')
+    #back at launching scope
+    child.expect(ipy_prompt)
+    child.sendline("print('true' if get_ipython() is ip0 else 'false')")
+    assert(child.expect(['true\r\n', 'false\r\n']) == 0)
+    child.expect(ipy_prompt)
+    child.sendline("print('true' if IPython.get_ipython() is ip0 else 'false')")
+    assert(child.expect(['true\r\n', 'false\r\n']) == 0)
+    child.expect(ipy_prompt)