diff --git a/spring-webflux/src/main/java/org/springframework/web/reactive/function/server/RouterFunctions.java b/spring-webflux/src/main/java/org/springframework/web/reactive/function/server/RouterFunctions.java
index 1a6b198617b..8b241efbd6c 100644
--- a/spring-webflux/src/main/java/org/springframework/web/reactive/function/server/RouterFunctions.java
+++ b/spring-webflux/src/main/java/org/springframework/web/reactive/function/server/RouterFunctions.java
@@ -16,6 +16,8 @@
 
 package org.springframework.web.reactive.function.server;
 
+import java.util.Collections;
+import java.util.LinkedHashMap;
 import java.util.List;
 import java.util.Map;
 import java.util.function.Function;
@@ -460,12 +462,28 @@ public abstract class RouterFunctions {
 													"Nested predicate \"%s\" matches against \"%s\"",
 													this.predicate, serverRequest));
 								}
-								return this.routerFunction.route(nestedRequest);
+								return this.routerFunction.route(nestedRequest)
+										.doOnNext(match -> {
+											mergeTemplateVariables(serverRequest, nestedRequest.pathVariables());
+										});
 							}
 					)
 					.orElseGet(Mono::empty);
 		}
 
+		@SuppressWarnings("unchecked")
+		private void mergeTemplateVariables(ServerRequest request, Map<String, String> variables) {
+			if (!variables.isEmpty()) {
+				Map<String, Object> attributes = request.attributes();
+				Map<String, String> oldVariables = (Map<String, String>)request.attribute(RouterFunctions.URI_TEMPLATE_VARIABLES_ATTRIBUTE)
+						.orElseGet(LinkedHashMap::new);
+				Map<String, String> mergedVariables = new LinkedHashMap<>(oldVariables);
+				mergedVariables.putAll(variables);
+				attributes.put(RouterFunctions.URI_TEMPLATE_VARIABLES_ATTRIBUTE,
+						Collections.unmodifiableMap(mergedVariables));
+			}
+		}
+
 		@Override
 		public void accept(Visitor visitor) {
 			visitor.startNested(this.predicate);
diff --git a/spring-webflux/src/test/java/org/springframework/web/reactive/function/server/NestedRouteIntegrationTests.java b/spring-webflux/src/test/java/org/springframework/web/reactive/function/server/NestedRouteIntegrationTests.java
index 087d5430d54..04c1087c469 100644
--- a/spring-webflux/src/test/java/org/springframework/web/reactive/function/server/NestedRouteIntegrationTests.java
+++ b/spring-webflux/src/test/java/org/springframework/web/reactive/function/server/NestedRouteIntegrationTests.java
@@ -41,11 +41,12 @@ public class NestedRouteIntegrationTests extends AbstractRouterFunctionIntegrati
 	protected RouterFunction<?> routerFunction() {
 		NestedHandler nestedHandler = new NestedHandler();
 		return nest(path("/foo/"),
-				route(GET("/bar"), nestedHandler::bar)
-						.andRoute(GET("/baz"), nestedHandler::baz))
-				.andNest(GET("/{foo}"),
-						nest(GET("/{bar}"),
-								route(GET("/{baz}"), nestedHandler::variables)))
+					route(GET("/bar"), nestedHandler::bar)
+					.andRoute(GET("/baz"), nestedHandler::baz))
+			   .andNest(GET("/{foo}"),
+					route(GET("/bar"), nestedHandler::variables).and(
+					nest(GET("/{bar}"),
+								route(GET("/{baz}"), nestedHandler::variables))))
 				.andRoute(GET("/{qux}/quux"), nestedHandler::variables);
 	}
 
@@ -77,6 +78,17 @@ public class NestedRouteIntegrationTests extends AbstractRouterFunctionIntegrati
 		assertEquals("{foo=1, bar=2, baz=3}", result.getBody());
 	}
 
+	// SPR-16868
+	@Test
+	public void parentVariables() throws Exception {
+		ResponseEntity<String> result =
+				restTemplate.getForEntity("http://localhost:" + port + "/1/bar", String.class);
+
+		assertEquals(HttpStatus.OK, result.getStatusCode());
+		assertEquals("{foo=1}", result.getBody());
+
+	}
+
 	// SPR 16692
 	@Test
 	public void removeFailedPathVariables() throws Exception {