diff --git a/docs/manifest-format.md b/docs/manifest-format.md
index b35a065f..2af34ac2 100644
--- a/docs/manifest-format.md
+++ b/docs/manifest-format.md
@@ -99,7 +99,8 @@ following DTD:
   <!ATTLIST repo-hooks enabled-list CDATA #REQUIRED>
 
   <!ELEMENT include EMPTY>
-  <!ATTLIST include name CDATA #REQUIRED>
+  <!ATTLIST include name   CDATA #REQUIRED>
+  <!ATTLIST include groups CDATA #IMPLIED>
 ]>
 ```
 
@@ -368,6 +369,10 @@ target manifest to include - it must be a usable manifest on its own.
 Attribute `name`: the manifest to include, specified relative to
 the manifest repository's root.
 
+Attribute `groups`: List of additional groups to which all projects
+in the included manifest belong. This appends and recurses, meaning
+all projects in sub-manifests carry all parent include groups.
+Same syntax as the corresponding element of `project`.
 
 ## Local Manifests
 
diff --git a/manifest_xml.py b/manifest_xml.py
index 95c67d73..ad0017cc 100644
--- a/manifest_xml.py
+++ b/manifest_xml.py
@@ -637,7 +637,7 @@ https://gerrit.googlesource.com/git-repo/+/HEAD/docs/manifest-format.md
 
       self._loaded = True
 
-  def _ParseManifestXml(self, path, include_root):
+  def _ParseManifestXml(self, path, include_root, parent_groups=''):
     try:
       root = xml.dom.minidom.parse(path)
     except (OSError, xml.parsers.expat.ExpatError) as e:
@@ -656,12 +656,17 @@ https://gerrit.googlesource.com/git-repo/+/HEAD/docs/manifest-format.md
     for node in manifest.childNodes:
       if node.nodeName == 'include':
         name = self._reqatt(node, 'name')
+        include_groups = ''
+        if parent_groups:
+          include_groups = parent_groups
+        if node.hasAttribute('groups'):
+          include_groups = node.getAttribute('groups') + ',' + include_groups
         fp = os.path.join(include_root, name)
         if not os.path.isfile(fp):
           raise ManifestParseError("include %s doesn't exist or isn't a file"
                                    % (name,))
         try:
-          nodes.extend(self._ParseManifestXml(fp, include_root))
+          nodes.extend(self._ParseManifestXml(fp, include_root, include_groups))
         # should isolate this to the exact exception, but that's
         # tricky.  actual parsing implementation may vary.
         except (KeyboardInterrupt, RuntimeError, SystemExit):
@@ -670,6 +675,11 @@ https://gerrit.googlesource.com/git-repo/+/HEAD/docs/manifest-format.md
           raise ManifestParseError(
               "failed parsing included manifest %s: %s" % (name, e))
       else:
+        if parent_groups and node.nodeName == 'project':
+          nodeGroups = parent_groups
+          if node.hasAttribute('groups'):
+            nodeGroups = node.getAttribute('groups') + ',' + nodeGroups
+          node.setAttribute('groups', nodeGroups)
         nodes.append(node)
     return nodes
 
diff --git a/tests/test_manifest_xml.py b/tests/test_manifest_xml.py
index 40385cce..939717be 100644
--- a/tests/test_manifest_xml.py
+++ b/tests/test_manifest_xml.py
@@ -235,3 +235,46 @@ class XmlManifestTests(unittest.TestCase):
     self.assertCountEqual(
         result['extras'],
         ['g1', 'g2', 'g1', 'name:extras', 'all', 'path:path'])
+
+  def test_include_levels(self):
+    root_m = os.path.join(self.manifest_dir, 'root.xml')
+    with open(root_m, 'w') as fp:
+      fp.write("""
+<manifest>
+  <remote name="test-remote" fetch="http://localhost" />
+  <default remote="test-remote" revision="refs/heads/main" />
+  <include name="level1.xml" groups="level1-group" />
+  <project name="root-name1" path="root-path1" />
+  <project name="root-name2" path="root-path2" groups="r2g1,r2g2" />
+</manifest>
+""")
+    with open(os.path.join(self.manifest_dir, 'level1.xml'), 'w') as fp:
+      fp.write("""
+<manifest>
+  <include name="level2.xml" groups="level2-group" />
+  <project name="level1-name1" path="level1-path1" />
+</manifest>
+""")
+    with open(os.path.join(self.manifest_dir, 'level2.xml'), 'w') as fp:
+      fp.write("""
+<manifest>
+  <project name="level2-name1" path="level2-path1" groups="l2g1,l2g2" />
+</manifest>
+""")
+    include_m = manifest_xml.XmlManifest(self.repodir, root_m)
+    for proj in include_m.projects:
+      if proj.name == 'root-name1':
+        # Check include group not set on root level proj.
+        self.assertNotIn('level1-group', proj.groups)
+      if proj.name == 'root-name2':
+        # Check root proj group not removed.
+        self.assertIn('r2g1', proj.groups)
+      if proj.name == 'level1-name1':
+        # Check level1 proj has inherited group level 1.
+        self.assertIn('level1-group', proj.groups)
+      if proj.name == 'level2-name1':
+        # Check level2 proj has inherited group levels 1 and 2.
+        self.assertIn('level1-group', proj.groups)
+        self.assertIn('level2-group', proj.groups)
+        # Check level2 proj group not removed.
+        self.assertIn('l2g1', proj.groups)