diff --git a/lib/dao.js b/lib/dao.js
index 9e58fc4f..8e1197fe 100644
--- a/lib/dao.js
+++ b/lib/dao.js
@@ -2380,14 +2380,16 @@ DataAccessObject.prototype.updateAttributes = function updateAttributes(data, op
             }
           }
 
+          context.data = typedData;
+
           function updateAttributesCallback(err) {
-            var context = {
+            var ctx = {
               Model: Model,
-              data: data,
+              data: context.data,
               hookState: hookState,
               options: options
             };
-            Model.notifyObserversOf('loaded', context, function(err) {
+            Model.notifyObserversOf('loaded', ctx, function(err) {
               if (!err) inst.__persisted = true;
 
               // By default, the instance passed to updateAttributes callback is NOT updated
@@ -2395,7 +2397,7 @@ DataAccessObject.prototype.updateAttributes = function updateAttributes(data, op
               // backwards compatibility, we introduced a new setting updateOnLoad,
               // which if set, will apply these changes to the model instance too.
               if(Model.settings.updateOnLoad) {
-                inst.setAttributes(context.data);
+                inst.setAttributes(ctx.data);
               }
               done.call(inst, function () {
                 saveDone.call(inst, function () {
@@ -2417,21 +2419,21 @@ DataAccessObject.prototype.updateAttributes = function updateAttributes(data, op
             });
           }
 
-          context = {
+          var ctx = {
             Model: Model,
             where: byIdQuery(Model, getIdValue(Model, inst)).where,
-            data: data,
+            data: context.data,
             currentInstance: inst,
             hookState: hookState,
             options: options
           };
-          Model.notifyObserversOf('persist', context, function(err) {
+          Model.notifyObserversOf('persist', ctx, function(err) {
             if (connector.updateAttributes.length === 5) {
               connector.updateAttributes(model, getIdValue(inst.constructor, inst),
-                inst.constructor._forDB(typedData), options, updateAttributesCallback);
+                inst.constructor._forDB(context.data), options, updateAttributesCallback);
             } else {
               connector.updateAttributes(model, getIdValue(inst.constructor, inst),
-                inst.constructor._forDB(typedData), updateAttributesCallback);
+                inst.constructor._forDB(context.data), updateAttributesCallback);
             }
           });
         }, data, cb);
diff --git a/test/persistence-hooks.suite.js b/test/persistence-hooks.suite.js
index ca5f7dd3..6bc4e494 100644
--- a/test/persistence-hooks.suite.js
+++ b/test/persistence-hooks.suite.js
@@ -1154,6 +1154,58 @@ module.exports = function(dataSource, should) {
         });
       });
 
+      it('applies updates from `persist` hook - for nested model instance', function(done) {
+        var Address = dataSource.createModel('Address', {
+          id: { type: String, id: true, default: 1 },
+          city: { type: String, required: true },
+          country: { type: String, required: true }
+        });
+
+        var User = dataSource.createModel('User', {
+          id: { type: String, id: true, default: uid() },
+          name: { type: String, required: true },
+          address: {type: Address, required: false}
+        });
+
+        User.create({name: 'Joe'}, function(err, instance) {
+          if (err) return done(err);
+
+          var existingUser = instance;
+
+          User.observe('persist', pushContextAndNext(function(ctx){
+            should.exist(ctx.data.address)
+            ctx.data.address.should.be.type('object');
+            ctx.data.address.should.not.be.instanceOf(Address);
+
+            ctx.data.extra = 'hook data';
+          }));
+
+          // By default, the instance passed to updateAttributes callback is NOT updated 
+          // with the changes made through persist/loaded hooks. To preserve 
+          // backwards compatibility, we introduced a new setting updateOnLoad, 
+          // which if set, will apply these changes to the model instance too.
+          User.settings.updateOnLoad = true;
+          existingUser.updateAttributes(
+            { address: new Address({city: 'Springfield', country: 'USA'}) }, 
+            function(err, inst) {
+              if (err) return done(err);
+
+              inst.should.have.property('extra', 'hook data');
+
+              User.findById(existingUser.id, function(err, dbInstance) {
+                if (err) return done(err);
+                dbInstance.toObject(true).should.eql({
+                  id: existingUser.id,
+                  name: existingUser.name,
+                  address: {id: '1', city: 'Springfield', country: 'USA'},
+                  extra: 'hook data'
+                });
+                done();
+              });
+            });
+        });
+      });
+
       it('triggers `loaded` hook', function(done) {
         TestModel.observe('loaded', pushContextAndNext());
         existingInstance.updateAttributes({ name: 'changed' }, function(err) {