PIM for Groups does support nested groups, but with important limitations and nuances:
- Activation Scope: If a user is an active member of Group A, and Group A is an eligible member of Group B, the user can activate their membership in Group B. However, this activation applies only to the individual user, not to the entire Group A. This means Group A does not become an active member of Group B as a whole
Performance Considerations: Nested group configurations can introduce delays in permission propagation, especially in services like Microsoft Purview. Users have reported activation delays ranging from 10 minutes to over an hour, particularly for complex roles like Content Explorer.
Configuration Caveats: Misconfigurations or unsupported group types (e.g., dynamic groups or on-prem synced groups) can cause nested group activation to fail. A user in a nested group may not receive access unless explicitly assigned.