diff --git a/packages/create-instance/create-component-stubs.js b/packages/create-instance/create-component-stubs.js
index 33470ae76..381e8ce63 100644
--- a/packages/create-instance/create-component-stubs.js
+++ b/packages/create-instance/create-component-stubs.js
@@ -10,7 +10,9 @@ import {
 import {
   componentNeedsCompiling,
   templateContainsComponent,
-  isVueComponent
+  isVueComponent,
+  isDynamicComponent,
+  isConstructor
 } from '../shared/validators'
 import {
   compileTemplate,
@@ -65,11 +67,11 @@ function createClassString (staticClass, dynamicClass) {
 }
 
 function resolveOptions (component, _Vue) {
-  if (typeof component === 'function' && !component.cid) {
+  if (isDynamicComponent(component)) {
     return {}
   }
 
-  return typeof component === 'function'
+  return isConstructor(component)
     ? component.options
     : _Vue.extend(component).options
 }
@@ -112,19 +114,16 @@ export function createStubFromComponent (
   }
 }
 
-export function createStubFromString (
+function createStubFromString (
   templateString: string,
   originalComponent: Component = {},
-  name: string
+  name: string,
+  _Vue: Component
 ): Component {
   if (templateContainsComponent(templateString, name)) {
     throwError('options.stub cannot contain a circular reference')
   }
-
-  const componentOptions =
-    typeof originalComponent === 'function' && originalComponent.cid
-      ? originalComponent.extendOptions
-      : originalComponent
+  const componentOptions = resolveOptions(originalComponent, _Vue)
 
   return {
     ...getCoreProperties(componentOptions),
@@ -167,7 +166,8 @@ export function createStubsFromStubsObject (
       acc[stubName] = createStubFromString(
         stub,
         component,
-        stubName
+        stubName,
+        _Vue
       )
       return acc
     }
diff --git a/packages/create-instance/create-instance.js b/packages/create-instance/create-instance.js
index 6e1cdd458..6cd7b2247 100644
--- a/packages/create-instance/create-instance.js
+++ b/packages/create-instance/create-instance.js
@@ -17,6 +17,7 @@ import { validateSlots } from './validate-slots'
 import createScopedSlots from './create-scoped-slots'
 import { createStubsFromStubsObject } from './create-component-stubs'
 import { patchCreateElement } from './patch-create-element'
+import { isConstructor } from 'shared/validators'
 
 function vueExtendUnsupportedOption (option: string) {
   return `options.${option} is not supported for ` +
@@ -39,13 +40,8 @@ export default function createInstance (
   options: Options,
   _Vue: Component
 ): Component {
-  // make sure all extends are based on this instance
-  _Vue.options._base = _Vue
-
   if (
-    VUE_VERSION < 2.3 &&
-    typeof component === 'function' &&
-    component.options
+    VUE_VERSION < 2.3 && isConstructor(component)
   ) {
     UNSUPPORTED_VERSION_OPTIONS.forEach((option) => {
       if (options[option]) {
@@ -54,11 +50,15 @@ export default function createInstance (
     })
   }
 
+  let componentOptions = isConstructor(component)
+    ? component.options
+    : component
+
   // instance options are options that are passed to the
   // root instance when it's instantiated
   const instanceOptions = extractInstanceOptions(options)
   const stubComponentsObject = createStubsFromStubsObject(
-    component.components,
+    componentOptions.components,
     // $FlowIgnore
     options.stubs,
     _Vue
@@ -69,11 +69,12 @@ export default function createInstance (
   addStubs(_Vue, stubComponentsObject)
   patchCreateElement(_Vue, stubComponentsObject, options.shouldProxy)
 
-  if (
-    (component.options && component.options.functional) ||
-    component.functional
-  ) {
-    component = createFunctionalComponent(component, options, _Vue)
+  if (componentOptions.functional) {
+    componentOptions = createFunctionalComponent(
+      componentOptions,
+      options,
+      _Vue
+    )
   } else if (options.context) {
     throwError(
       `mount.context can only be used when mounting a ` +
@@ -81,19 +82,14 @@ export default function createInstance (
     )
   }
 
-  if (componentNeedsCompiling(component)) {
-    compileTemplate(component)
+  if (componentNeedsCompiling(componentOptions)) {
+    compileTemplate(componentOptions)
   }
 
-  if (component.options) {
-    component.options._base = _Vue
-  }
+  // make sure all extends are based on this instance
+  componentOptions._base = _Vue
 
-  // extend component from _Vue to add properties and mixins
-  // extend does not work correctly for sub class components in Vue < 2.2
-  const Constructor = typeof component === 'function'
-    ? _Vue.extend(component.options).extend(instanceOptions)
-    : _Vue.extend(component).extend(instanceOptions)
+  const Constructor = _Vue.extend(componentOptions).extend(instanceOptions)
 
   // used to identify extended component using constructor
   Constructor.options.$_vueTestUtils_original = component
@@ -122,8 +118,7 @@ export default function createInstance (
 
   if (options.parentComponent && !isPlainObject(options.parentComponent)) {
     throwError(
-      `options.parentComponent should be a valid Vue component ` +
-      `options object`
+      `options.parentComponent should be a valid Vue component options object`
     )
   }
 
diff --git a/packages/create-instance/patch-create-element.js b/packages/create-instance/patch-create-element.js
index 43e0a8dd6..741866cf3 100644
--- a/packages/create-instance/patch-create-element.js
+++ b/packages/create-instance/patch-create-element.js
@@ -1,6 +1,11 @@
 import { createStubFromComponent } from './create-component-stubs'
 import { resolveComponent } from 'shared/util'
-import { isReservedTag } from 'shared/validators'
+import {
+  isReservedTag,
+  isConstructor,
+  isDynamicComponent,
+  isComponentOptions
+} from 'shared/validators'
 import {
   BEFORE_RENDER_LIFECYCLE_HOOK,
   CREATE_ELEMENT_ALIAS
@@ -8,11 +13,10 @@ import {
 
 const isWhitelisted = (el, whitelist) => resolveComponent(el, whitelist)
 const isAlreadyStubbed = (el, stubs) => stubs.has(el)
-const isDynamicComponent = cmp => typeof cmp === 'function' && !cmp.cid
 
 function shouldExtend (component, _Vue) {
   return (
-    (typeof component === 'function' && !isDynamicComponent(component)) ||
+    isConstructor(component) ||
     (component && component.extends)
   )
 }
@@ -21,6 +25,7 @@ function extend (component, _Vue) {
   const componentOptions = component.options ? component.options : component
   const stub = _Vue.extend(componentOptions)
   stub.options.$_vueTestUtils_original = component
+  stub.options._base = _Vue
   return stub
 }
 
@@ -42,14 +47,6 @@ function shouldNotBeStubbed (el, whitelist, modifiedComponents) {
   )
 }
 
-function isConstructor (el) {
-  return typeof el === 'function'
-}
-
-function isComponentOptions (el) {
-  return typeof el === 'object' && (el.template || el.render)
-}
-
 export function patchCreateElement (_Vue, stubs, stubAllComponents) {
   // This mixin patches vm.$createElement so that we can stub all components
   // before they are rendered in shallow mode. We also need to ensure that
@@ -87,7 +84,7 @@ export function patchCreateElement (_Vue, stubs, stubAllComponents) {
       }
 
       if (typeof el === 'string') {
-        let original = resolveComponent(el, originalComponents)
+        const original = resolveComponent(el, originalComponents)
 
         if (!original) {
           return originalCreateElement(el, ...args)
@@ -97,12 +94,6 @@ export function patchCreateElement (_Vue, stubs, stubAllComponents) {
           return originalCreateElement(el, ...args)
         }
 
-        if (
-          original.options &&
-          original.options.$_vueTestUtils_original
-        ) {
-          original = original.options.$_vueTestUtils_original
-        }
         const stub = createStubIfNeeded(stubAllComponents, original, _Vue, el)
 
         if (stub) {
diff --git a/packages/shared/validators.js b/packages/shared/validators.js
index c24453a2d..3dfb6a7dc 100644
--- a/packages/shared/validators.js
+++ b/packages/shared/validators.js
@@ -28,24 +28,24 @@ export function isDomSelector (selector: any): boolean {
   }
 }
 
-export function isVueComponent (component: any): boolean {
-  if (typeof component === 'function' && component.options) {
+export function isVueComponent (c: any): boolean {
+  if (isConstructor(c)) {
     return true
   }
 
-  if (component === null || typeof component !== 'object') {
+  if (c === null || typeof c !== 'object') {
     return false
   }
 
-  if (component.extends || component._Ctor) {
+  if (c.extends || c._Ctor) {
     return true
   }
 
-  if (typeof component.template === 'string') {
+  if (typeof c.template === 'string') {
     return true
   }
 
-  return typeof component.render === 'function'
+  return typeof c.render === 'function'
 }
 
 export function componentNeedsCompiling (component: Component): boolean {
@@ -76,6 +76,18 @@ export function isNameSelector (nameOptionsObject: any): boolean {
   return !!nameOptionsObject.name
 }
 
+export function isConstructor (c: any) {
+  return typeof c === 'function' && c.cid
+}
+
+export function isDynamicComponent (c: any) {
+  return typeof c === 'function' && !c.cid
+}
+
+export function isComponentOptions (c: any) {
+  return typeof c === 'object' && (c.template || c.render)
+}
+
 export function templateContainsComponent (
   template: string,
   name: string
@@ -86,8 +98,8 @@ export function templateContainsComponent (
   })
 }
 
-export function isPlainObject (obj: any): boolean {
-  return Object.prototype.toString.call(obj) === '[object Object]'
+export function isPlainObject (c: any): boolean {
+  return Object.prototype.toString.call(c) === '[object Object]'
 }
 
 export function isRequiredComponent (name: string): boolean {
diff --git a/packages/test-utils/src/matches.js b/packages/test-utils/src/matches.js
index 87f95bb33..0739932c6 100644
--- a/packages/test-utils/src/matches.js
+++ b/packages/test-utils/src/matches.js
@@ -3,6 +3,7 @@ import {
   COMPONENT_SELECTOR,
   FUNCTIONAL_OPTIONS
 } from 'shared/consts'
+import { isConstructor } from 'shared/validators'
 
 export function vmMatchesName (vm, name) {
   return !!name && (
@@ -19,7 +20,7 @@ function vmCtorMatches (vm, component) {
     return true
   }
 
-  const Ctor = typeof component === 'function'
+  const Ctor = isConstructor(component)
     ? component.options._Ctor
     : component._Ctor
 
@@ -46,7 +47,7 @@ export function matches (node, selector) {
     return element && element.matches && element.matches(selector.value)
   }
 
-  const isFunctionalSelector = typeof selector.value === 'function'
+  const isFunctionalSelector = isConstructor(selector.value)
     ? selector.value.options.functional
     : selector.value.functional
 
@@ -66,7 +67,7 @@ export function matches (node, selector) {
 
   // Fallback to name selector for COMPONENT_SELECTOR for Vue < 2.1
   const nameSelector =
-  typeof selector.value === 'function'
+  isConstructor(selector.value)
     ? selector.value.extendOptions.name
     : selector.value.name
   return vmMatchesName(componentInstance, nameSelector)
diff --git a/test/specs/mount.spec.js b/test/specs/mount.spec.js
index c1dd1a462..10f15c8d2 100644
--- a/test/specs/mount.spec.js
+++ b/test/specs/mount.spec.js
@@ -384,6 +384,32 @@ describeRunIf(process.env.TEST_ENV !== 'node', 'mount', () => {
     expect(wrapper.findAll(ChildComponent).length).to.equal(1)
   })
 
+  it('handles nested components with extends', () => {
+    const GrandChildComponent = {
+      template: '<div />',
+      created () {
+        this.$route.params
+      }
+    }
+    const ChildComponent = Vue.extend({
+      template: '<grand-child-component />',
+      components: {
+        GrandChildComponent
+      }
+    })
+    const TestComponent = {
+      template: '<child-component />',
+      components: {
+        ChildComponent
+      }
+    }
+    const localVue = createLocalVue()
+    localVue.prototype.$route = {}
+    mount(TestComponent, {
+      localVue
+    })
+  })
+
   it('throws if component throws during update', () => {
     const TestComponent = {
       template: '<div :p="a" />',
diff --git a/test/specs/mounting-options/stubs.spec.js b/test/specs/mounting-options/stubs.spec.js
index 9abac1bf3..b959ef397 100644
--- a/test/specs/mounting-options/stubs.spec.js
+++ b/test/specs/mounting-options/stubs.spec.js
@@ -216,7 +216,7 @@ describeWithMountingMethods('options.stub', mountingMethod => {
         components: { GrandChildComponent }
       }
       const TestComponent = {
-        template: '<div><child-component /></div>',
+        template: '<child-component />',
         components: { ChildComponent }
       }
       const wrapper = mountingMethod(Vue.extend(TestComponent), {