diff --git a/spring-boot-tools/spring-boot-loader/src/main/java/org/springframework/boot/loader/jar/Handler.java b/spring-boot-tools/spring-boot-loader/src/main/java/org/springframework/boot/loader/jar/Handler.java
index 4637c65a32..d4c1841656 100644
--- a/spring-boot-tools/spring-boot-loader/src/main/java/org/springframework/boot/loader/jar/Handler.java
+++ b/spring-boot-tools/spring-boot-loader/src/main/java/org/springframework/boot/loader/jar/Handler.java
@@ -34,6 +34,7 @@ import java.util.logging.Logger;
  * {@link URLStreamHandler} for Spring Boot loader {@link JarFile}s.
  *
  * @author Phillip Webb
+ * @author Andy Wilkinson
  * @see JarFile#registerUrlProtocolHandler()
  */
 public class Handler extends URLStreamHandler {
@@ -41,6 +42,8 @@ public class Handler extends URLStreamHandler {
 	// NOTE: in order to be found as a URL protocol handler, this class must be public,
 	// must be named Handler and must be in a package ending '.jar'
 
+	private static final String JAR_PROTOCOL = "jar:";
+
 	private static final String FILE_PROTOCOL = "file:";
 
 	private static final String SEPARATOR = "!/";
@@ -140,6 +143,85 @@ public class Handler extends URLStreamHandler {
 		return (URLConnection) OPEN_CONNECTION_METHOD.invoke(handler, url);
 	}
 
+	@Override
+	protected void parseURL(URL context, String spec, int start, int limit) {
+		if (spec.toLowerCase().startsWith(JAR_PROTOCOL)) {
+			setFile(context, getFileFromSpec(spec.substring(start, limit)));
+		}
+		else {
+			setFile(context, getFileFromContext(context, spec.substring(start, limit)));
+		}
+	}
+
+	private String getFileFromSpec(String spec) {
+		int separatorIndex = spec.lastIndexOf("!/");
+		if (separatorIndex == -1) {
+			throw new IllegalArgumentException("No !/ in spec '" + spec + "'");
+		}
+		try {
+			new URL(spec.substring(0, separatorIndex));
+			return spec;
+		}
+		catch (MalformedURLException ex) {
+			throw new IllegalArgumentException("Invalid spec URL '" + spec + "'", ex);
+		}
+	}
+
+	private String getFileFromContext(URL context, String spec) {
+		String file = context.getFile();
+		if (spec.startsWith("/")) {
+			return trimToJarRoot(file) + SEPARATOR + spec.substring(1);
+		}
+		if (file.endsWith("/")) {
+			return file + spec;
+		}
+		int lastSlashIndex = file.lastIndexOf('/');
+		if (lastSlashIndex == -1) {
+			throw new IllegalArgumentException(
+					"No / found in context URL's file '" + file + "'");
+		}
+		return file.substring(0, lastSlashIndex + 1) + spec;
+	}
+
+	private String trimToJarRoot(String file) {
+		int lastSeparatorIndex = file.lastIndexOf(SEPARATOR);
+		if (lastSeparatorIndex == -1) {
+			throw new IllegalArgumentException(
+					"No !/ found in context URL's file '" + file + "'");
+		}
+		return file.substring(0, lastSeparatorIndex);
+	}
+
+	private void setFile(URL context, String file) {
+		setURL(context, JAR_PROTOCOL, null, -1, null, null, file, null, null);
+	}
+
+	@Override
+	protected boolean sameFile(URL u1, URL u2) {
+		if (!u1.getProtocol().equals("jar") || u2.getProtocol().equals("jar")) {
+			return super.sameFile(u1, u2);
+		}
+		int separator1 = u1.getFile().indexOf(SEPARATOR);
+		int separator2 = u1.getFile().indexOf(SEPARATOR);
+		if (separator1 < 0 || separator2 < 0) {
+			return super.sameFile(u1, u2);
+		}
+		String root1 = u1.getFile().substring(separator1 + SEPARATOR.length());
+		String root2 = u2.getFile().substring(separator2 + SEPARATOR.length());
+		if (!root1.equals(root2)) {
+			return super.sameFile(u1, u2);
+		}
+		String nested1 = u1.getFile().substring(0, separator1);
+		String nested2 = u1.getFile().substring(0, separator2);
+		try {
+			return super.sameFile(new URL(nested1), new URL(nested2));
+		}
+		catch (MalformedURLException ex) {
+			// Continue
+		}
+		return super.sameFile(u1, u2);
+	}
+
 	public JarFile getRootJarFileFromUrl(URL url) throws IOException {
 		String spec = url.getFile();
 		int separatorIndex = spec.indexOf(SEPARATOR);
diff --git a/spring-boot-tools/spring-boot-loader/src/test/java/org/springframework/boot/loader/jar/HandlerTests.java b/spring-boot-tools/spring-boot-loader/src/test/java/org/springframework/boot/loader/jar/HandlerTests.java
new file mode 100644
index 0000000000..8b5dbe31b1
--- /dev/null
+++ b/spring-boot-tools/spring-boot-loader/src/test/java/org/springframework/boot/loader/jar/HandlerTests.java
@@ -0,0 +1,96 @@
+/*
+ * Copyright 2012-2016 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.
+ * You may obtain a copy of the License at
+ *
+ *      http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+
+package org.springframework.boot.loader.jar;
+
+import java.net.MalformedURLException;
+import java.net.URL;
+
+import org.junit.Test;
+
+import static org.assertj.core.api.Assertions.assertThat;
+
+/**
+ * Tests for {@link Handler}.
+ *
+ * @author Andy Wilkinson
+ */
+public class HandlerTests {
+
+	private final Handler handler = new Handler();
+
+	@Test
+	public void parseUrlWithJarRootContextAndAbsoluteSpecThatUsesContext()
+			throws MalformedURLException {
+		String spec = "/entry.txt";
+		URL context = createUrl("file:example.jar!/");
+		this.handler.parseURL(context, spec, 0, spec.length());
+		assertThat(context.toExternalForm()).isEqualTo("jar:file:example.jar!/entry.txt");
+	}
+
+	@Test
+	public void parseUrlWithDirectoryEntryContextAndAbsoluteSpecThatUsesContext()
+			throws MalformedURLException {
+		String spec = "/entry.txt";
+		URL context = createUrl("file:example.jar!/dir/");
+		this.handler.parseURL(context, spec, 0, spec.length());
+		assertThat(context.toExternalForm()).isEqualTo("jar:file:example.jar!/entry.txt");
+	}
+
+	@Test
+	public void parseUrlWithJarRootContextAndRelativeSpecThatUsesContext()
+			throws MalformedURLException {
+		String spec = "entry.txt";
+		URL context = createUrl("file:example.jar!/");
+		this.handler.parseURL(context, spec, 0, spec.length());
+		assertThat(context.toExternalForm()).isEqualTo("jar:file:example.jar!/entry.txt");
+	}
+
+	@Test
+	public void parseUrlWithDirectoryEntryContextAndRelativeSpecThatUsesContext()
+			throws MalformedURLException {
+		String spec = "entry.txt";
+		URL context = createUrl("file:example.jar!/dir/");
+		this.handler.parseURL(context, spec, 0, spec.length());
+		assertThat(context.toExternalForm())
+				.isEqualTo("jar:file:example.jar!/dir/entry.txt");
+	}
+
+	@Test
+	public void parseUrlWithFileEntryContextAndRelativeSpecThatUsesContext()
+			throws MalformedURLException {
+		String spec = "entry.txt";
+		URL context = createUrl("file:example.jar!/dir/file");
+		this.handler.parseURL(context, spec, 0, spec.length());
+		assertThat(context.toExternalForm())
+				.isEqualTo("jar:file:example.jar!/dir/entry.txt");
+	}
+
+	@Test
+	public void parseUrlWithSpecThatIgnoresContext() throws MalformedURLException {
+		JarFile.registerUrlProtocolHandler();
+		String spec = "jar:file:/other.jar!/nested!/entry.txt";
+		URL context = createUrl("file:example.jar!/dir/file");
+		this.handler.parseURL(context, spec, 0, spec.length());
+		assertThat(context.toExternalForm())
+				.isEqualTo("jar:jar:file:/other.jar!/nested!/entry.txt");
+	}
+
+	private URL createUrl(String file) throws MalformedURLException {
+		return new URL("jar", null, -1, file, this.handler);
+	}
+
+}
diff --git a/spring-boot-tools/spring-boot-loader/src/test/java/org/springframework/boot/loader/jar/JarURLConnectionTests.java b/spring-boot-tools/spring-boot-loader/src/test/java/org/springframework/boot/loader/jar/JarURLConnectionTests.java
index 32a38cb2ee..ef98792d9f 100644
--- a/spring-boot-tools/spring-boot-loader/src/test/java/org/springframework/boot/loader/jar/JarURLConnectionTests.java
+++ b/spring-boot-tools/spring-boot-loader/src/test/java/org/springframework/boot/loader/jar/JarURLConnectionTests.java
@@ -18,7 +18,6 @@ package org.springframework.boot.loader.jar;
 
 import java.io.ByteArrayInputStream;
 import java.io.File;
-import java.io.FileNotFoundException;
 import java.net.URL;
 
 import org.junit.Before;
@@ -127,15 +126,14 @@ public class JarURLConnectionTests {
 	}
 
 	@Test
-	public void nestedJarNotFound() throws Exception {
-		URL url = new URL(
-				"jar:file:" + getAbsolutePath() + "!/nested.jar!/missing.jar!/1.dat");
+	public void connectionToEntryInNestedJarFromUrlThatUsesExistingUrlAsContext()
+			throws Exception {
+		URL url = new URL(new URL("jar", null, -1,
+				"file:" + getAbsolutePath() + "!/nested.jar!/", new Handler()), "/3.dat");
 		JarFile nested = this.jarFile
 				.getNestedJarFile(this.jarFile.getEntry("nested.jar"));
-		JarURLConnection connection = JarURLConnection.get(url, nested);
-		this.thrown.expect(FileNotFoundException.class);
-		this.thrown.expectMessage("JAR entry missing.jar not found in");
-		connection.connect();
+		assertThat(JarURLConnection.get(url, nested).getInputStream())
+				.hasSameContentAs(new ByteArrayInputStream(new byte[] { 3 }));
 	}
 
 	private String getAbsolutePath() {