diff --git a/changes/1414-patrickkwang.md b/changes/1414-patrickkwang.md
new file mode 100644
index 0000000000..898f5f8cd4
--- /dev/null
+++ b/changes/1414-patrickkwang.md
@@ -0,0 +1 @@
+Squash internal `__root__` dicts in `.dict()` (and, by extension, in `.json()`).
\ No newline at end of file
diff --git a/pydantic/main.py b/pydantic/main.py
index 201ba6ed16..76c4008ba2 100644
--- a/pydantic/main.py
+++ b/pydantic/main.py
@@ -610,7 +610,7 @@ def _get_value(
 
         if isinstance(v, BaseModel):
             if to_dict:
-                return v.dict(
+                v_dict = v.dict(
                     by_alias=by_alias,
                     exclude_unset=exclude_unset,
                     exclude_defaults=exclude_defaults,
@@ -618,6 +618,9 @@ def _get_value(
                     exclude=exclude,
                     exclude_none=exclude_none,
                 )
+                if '__root__' in v_dict:
+                    return v_dict['__root__']
+                return v_dict
             else:
                 return v.copy(include=include, exclude=exclude)
 
diff --git a/tests/test_main.py b/tests/test_main.py
index 32237d7672..e39d22df36 100644
--- a/tests/test_main.py
+++ b/tests/test_main.py
@@ -869,6 +869,26 @@ class MyModel(BaseModel):
     assert m.__root__ == ['a']
 
 
+def test_encode_nested_root():
+    house_dict = {'pets': ['dog', 'cats']}
+
+    class Pets(BaseModel):
+        __root__: List[str]
+
+    class House(BaseModel):
+        pets: Pets
+
+    assert House(**house_dict).dict() == house_dict
+
+    class PetsDeep(BaseModel):
+        __root__: Pets
+
+    class HouseDeep(BaseModel):
+        pets: PetsDeep
+
+    assert HouseDeep(**house_dict).dict() == house_dict
+
+
 def test_root_failed():
     with pytest.raises(ValueError, match='__root__ cannot be mixed with other fields'):