Generated by SassMeister.com.

SassMeister-input.scss

// ----
// Sass (v3.3.0.rc.5)
// Compass (v1.0.0.alpha.18)
// ----

.block {
  color: blue;
  
  &__element {
    border: 1px solid red;
  }
  
  &--modifier {
    color: red;

    .test-nested & {
      color: green;
    }
  }
}

/* When nesting, "&" refers to the correct element */

.nested .block {
  color: blue;
  
  &__element {
    border: 1px solid red;
  }
  
  &--modifier {
    color: red;

    .test-nested & {
      color: green;
    }
  }
}

SassMeister-output.css

.block {
  color: blue;
}
.block__element {
  border: 1px solid red;
}
.block--modifier {
  color: red;
}
.test-nested .block--modifier {
  color: green;
}

/* When nesting, "&" refers to the correct element */
.nested .block {
  color: blue;
}
.nested .block__element {
  border: 1px solid red;
}
.nested .block--modifier {
  color: red;
}
.test-nested .nested .block--modifier {
  color: green;
}