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Question

Our on prem AD is connected to Azure AD. Groups in on prem AD are used to control permissions to various resources. Does this configuration support nesting of security groups? I place a security group inside another security group in the on prem AD. I have read that it does not but that was from 2 years ago. I have tested it somewhat and haven't been able to get it to work.

Answer 1

Nested groups are still not supported for application access, and a couple other scenarios.

At this time, the following scenarios are supported with nested groups:

• One group can be added as a member of another group, and you can achieve group nesting.
• Group membership claims. When an app is configured to receive group membership claims in the token, nested groups in which the signed-in user is a member are included.
• Conditional access (when a conditional access policy has a group scope).
• Restricting access to self-serve password reset.
• Restricting which users can do Azure AD Join and device registration.

The following scenarios are not supported with nested groups:

• App role assignment, for both access and provisioning. Assigning groups to an app is supported, but any groups nested within the
  directly assigned group won't have access.
• Group-based licensing (assigning a license automatically to all members of a group).
• Microsoft 365 Groups.

Reference

https://learn.microsoft.com/en-us/azure/active-directory/enterprise-users/directory-service-limits-restrictions