diff --git a/changes/1364-DBCerigo.md b/changes/1364-DBCerigo.md
new file mode 100644
index 0000000000..ed31901e41
--- /dev/null
+++ b/changes/1364-DBCerigo.md
@@ -0,0 +1 @@
+Fix model validation to handle nested literals, e.g. `Literal['foo', Literal['bar']]`.
diff --git a/pydantic/typing.py b/pydantic/typing.py
index 163185f0c3..ed8c23c71f 100644
--- a/pydantic/typing.py
+++ b/pydantic/typing.py
@@ -179,6 +179,19 @@ def literal_values(type_: AnyType) -> Tuple[Any, ...]:
         return type_.__values__
 
 
+def all_literal_values(type_: Type[Any]) -> Tuple[Any, ...]:
+    """
+    This method is used to retrieve all Literal values as
+    Literal can be used recursively (see https://www.python.org/dev/peps/pep-0586)
+    e.g. `Literal[Literal[Literal[1, 2, 3], "foo"], 5, None]`
+    """
+    if not is_literal_type(type_):
+        return (type_,)
+
+    values = literal_values(type_)
+    return tuple(x for value in values for x in all_literal_values(value))
+
+
 test_type = NewType('test_type', str)
 
 
diff --git a/pydantic/validators.py b/pydantic/validators.py
index 7249849dc1..7149f235aa 100644
--- a/pydantic/validators.py
+++ b/pydantic/validators.py
@@ -1,5 +1,4 @@
 import re
-import sys
 from collections import OrderedDict
 from collections.abc import Hashable
 from datetime import date, datetime, time, timedelta
@@ -26,7 +25,16 @@
 
 from . import errors
 from .datetime_parse import parse_date, parse_datetime, parse_duration, parse_time
-from .typing import AnyCallable, AnyType, ForwardRef, display_as_type, get_class, is_callable_type, is_literal_type
+from .typing import (
+    AnyCallable,
+    AnyType,
+    ForwardRef,
+    all_literal_values,
+    display_as_type,
+    get_class,
+    is_callable_type,
+    is_literal_type,
+)
 from .utils import almost_equal_floats, lenient_issubclass, sequence_like
 
 if TYPE_CHECKING:
@@ -394,10 +402,7 @@ def callable_validator(v: Any) -> AnyCallable:
 
 
 def make_literal_validator(type_: Any) -> Callable[[Any], Any]:
-    if sys.version_info >= (3, 7):
-        permitted_choices = type_.__args__
-    else:
-        permitted_choices = type_.__values__
+    permitted_choices = all_literal_values(type_)
     allowed_choices_set = set(permitted_choices)
 
     def literal_validator(v: Any) -> Any:
diff --git a/tests/test_utils.py b/tests/test_utils.py
index feb373ce60..5dba3ebc48 100644
--- a/tests/test_utils.py
+++ b/tests/test_utils.py
@@ -11,7 +11,7 @@
 from pydantic.color import Color
 from pydantic.dataclasses import dataclass
 from pydantic.fields import Undefined
-from pydantic.typing import display_as_type, is_new_type, new_type_supertype
+from pydantic.typing import Literal, all_literal_values, display_as_type, is_new_type, new_type_supertype
 from pydantic.utils import (
     ClassAttribute,
     ValueItems,
@@ -320,3 +320,16 @@ class Foo:
     f = Foo()
     f.attr = 'not foo'
     assert f.attr == 'not foo'
+
+
+@pytest.mark.skipif(not Literal, reason='typing_extensions not installed')
+def test_all_literal_values():
+    L1 = Literal['1']
+    assert all_literal_values(L1) == ('1',)
+
+    L2 = Literal['2']
+    L12 = Literal[L1, L2]
+    assert sorted(all_literal_values(L12)) == sorted(('1', '2'))
+
+    L312 = Literal['3', Literal[L1, L2]]
+    assert sorted(all_literal_values(L312)) == sorted(('1', '2', '3'))
diff --git a/tests/test_validators.py b/tests/test_validators.py
index 386fbbeb77..2ff9359765 100644
--- a/tests/test_validators.py
+++ b/tests/test_validators.py
@@ -6,6 +6,7 @@
 
 from pydantic import BaseModel, ConfigError, Extra, ValidationError, errors, validator
 from pydantic.class_validators import make_generic_validator, root_validator
+from pydantic.typing import Literal
 
 
 def test_simple():
@@ -1038,3 +1039,44 @@ def check_foo(cls, value):
     m = Model(name='hello')
     m.name = 'goodbye'
     assert validator_calls == 2
+
+
+@pytest.mark.skipif(not Literal, reason='typing_extensions not installed')
+def test_literal_validator():
+    class Model(BaseModel):
+        a: Literal['foo']
+
+    Model(a='foo')
+
+    with pytest.raises(ValidationError) as exc_info:
+        Model(a='nope')
+    assert exc_info.value.errors() == [
+        {
+            'loc': ('a',),
+            'msg': "unexpected value; permitted: 'foo'",
+            'type': 'value_error.const',
+            'ctx': {'given': 'nope', 'permitted': ('foo',)},
+        }
+    ]
+
+
+@pytest.mark.skipif(not Literal, reason='typing_extensions not installed')
+def test_nested_literal_validator():
+    L1 = Literal['foo']
+    L2 = Literal['bar']
+
+    class Model(BaseModel):
+        a: Literal[L1, L2]
+
+    Model(a='foo')
+
+    with pytest.raises(ValidationError) as exc_info:
+        Model(a='nope')
+    assert exc_info.value.errors() == [
+        {
+            'loc': ('a',),
+            'msg': "unexpected value; permitted: 'foo', 'bar'",
+            'type': 'value_error.const',
+            'ctx': {'given': 'nope', 'permitted': ('foo', 'bar')},
+        }
+    ]