diff --git a/spring-core/src/main/java/org/springframework/core/env/PropertySourcesPropertyResolver.java b/spring-core/src/main/java/org/springframework/core/env/PropertySourcesPropertyResolver.java
index b390d4ddaba..cee4db51a6a 100644
--- a/spring-core/src/main/java/org/springframework/core/env/PropertySourcesPropertyResolver.java
+++ b/spring-core/src/main/java/org/springframework/core/env/PropertySourcesPropertyResolver.java
@@ -72,6 +72,9 @@ public class PropertySourcesPropertyResolver extends AbstractPropertyResolver {
 			Object value;
 			if ((value = propertySource.getProperty(key)) != null) {
 				Class<?> valueType = value.getClass();
+				if (String.class.equals(valueType)) {
+					value = this.resolveRequiredPlaceholders((String) value);
+				}
 				if (debugEnabled) {
 					logger.debug(
 							format("Found key '%s' in [%s] with type [%s] and value '%s'",
diff --git a/spring-core/src/main/java/org/springframework/util/PropertyPlaceholderHelper.java b/spring-core/src/main/java/org/springframework/util/PropertyPlaceholderHelper.java
index 5c769fae5ce..0bea53ea6a4 100644
--- a/spring-core/src/main/java/org/springframework/util/PropertyPlaceholderHelper.java
+++ b/spring-core/src/main/java/org/springframework/util/PropertyPlaceholderHelper.java
@@ -171,7 +171,8 @@ public class PropertyPlaceholderHelper {
 					startIndex = buf.indexOf(this.placeholderPrefix, endIndex + this.placeholderSuffix.length());
 				}
 				else {
-					throw new IllegalArgumentException("Could not resolve placeholder '" + placeholder + "'");
+					throw new IllegalArgumentException("Could not resolve placeholder '" +
+							placeholder + "'" + " in string value [" + strVal + "]");
 				}
 
 				visitedPlaceholders.remove(originalPlaceholder);
diff --git a/spring-core/src/test/java/org/springframework/core/env/PropertySourcesPropertyResolverTests.java b/spring-core/src/test/java/org/springframework/core/env/PropertySourcesPropertyResolverTests.java
index 4d02d12ef45..c51fd358c82 100644
--- a/spring-core/src/test/java/org/springframework/core/env/PropertySourcesPropertyResolverTests.java
+++ b/spring-core/src/test/java/org/springframework/core/env/PropertySourcesPropertyResolverTests.java
@@ -1,5 +1,5 @@
 /*
- * Copyright 2002-2011 the original author or authors.
+ * Copyright 2002-2012 the original author or authors.
  *
  * Licensed under the Apache License, Version 2.0 (the "License");
  * you may not use this file except in compliance with the License.
@@ -16,22 +16,20 @@
 
 package org.springframework.core.env;
 
-import static org.hamcrest.CoreMatchers.equalTo;
-import static org.hamcrest.CoreMatchers.is;
-import static org.hamcrest.CoreMatchers.nullValue;
-import static org.junit.Assert.assertThat;
-import static org.junit.Assert.assertTrue;
-import static org.junit.Assert.fail;
-
 import java.util.HashMap;
 import java.util.Map;
 import java.util.Properties;
 
+import org.hamcrest.Matchers;
 import org.junit.Before;
 import org.junit.Test;
+
 import org.springframework.core.convert.ConversionException;
 import org.springframework.mock.env.MockPropertySource;
 
+import static org.hamcrest.CoreMatchers.*;
+import static org.junit.Assert.*;
+
 /**
  * Unit tests for {@link PropertySourcesPropertyResolver}.
  *
@@ -352,6 +350,39 @@ public class PropertySourcesPropertyResolverTests {
 		propertyResolver.validateRequiredProperties();
 	}
 
+	@Test
+	public void resolveNestedPropertyPlaceholders() {
+		MutablePropertySources ps = new MutablePropertySources();
+		ps.addFirst(new MockPropertySource()
+			.withProperty("p1", "v1")
+			.withProperty("p2", "v2")
+			.withProperty("p3", "${p1}:${p2}")              // nested placeholders
+			.withProperty("p4", "${p3}")                    // deeply nested placeholders
+			.withProperty("p5", "${p1}:${p2}:${bogus}")     // unresolvable placeholder
+			.withProperty("p6", "${p1}:${p2}:${bogus:def}") // unresolvable w/ default
+			.withProperty("pL", "${pR}")                    // cyclic reference left
+			.withProperty("pR", "${pL}")                    // cyclic reference right
+		);
+		PropertySourcesPropertyResolver pr = new PropertySourcesPropertyResolver(ps);
+		assertThat(pr.getProperty("p1"), equalTo("v1"));
+		assertThat(pr.getProperty("p2"), equalTo("v2"));
+		assertThat(pr.getProperty("p3"), equalTo("v1:v2"));
+		assertThat(pr.getProperty("p4"), equalTo("v1:v2"));
+		try {
+			pr.getProperty("p5");
+		} catch (IllegalArgumentException ex) {
+			assertThat(ex.getMessage(), Matchers.containsString(
+					"Could not resolve placeholder 'bogus' in string value [${p1}:${p2}:${bogus}]"));
+		}
+		assertThat(pr.getProperty("p6"), equalTo("v1:v2:def"));
+		try {
+			pr.getProperty("pL");
+		} catch (StackOverflowError ex) {
+			// no explicit handling for cyclic references for now
+		}
+	}
+
+
 	static interface SomeType { }
 	static class SpecificType implements SomeType { }
 }