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If it has just one level of hidden volume, that throws plausible deniability out the window. If the intimidators don't find what they're looking for in the outer volume, they'll probably believe you have a hidden volume. So in addition to decrypting the outer volume, you'll have to show them the hidden volume or they'll throw you in jail or whatever their threatening tactic is.

But if it allows arbitrary levels of nesting the hidden volumes, you could decrypt the outer volume and n levels of hidden volumes, while keeping your sensitive data at level n+1 or deeper.

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I don't believe Truecrypt has this ability natively, but you could make some batchfiles to mount the n+1 levels automatically whenever you'd need access. –  Breakthrough Jul 2 '11 at 23:20
    
What do you mean ... are there command-line options to create a hidden volume within a hidden volume? –  Mike Rowave Jul 3 '11 at 14:11
    
Couldn't you just try it and find out? Create a volume, create a hidden volume in it. Mount the volume, try and create a hidden volume in the hidden volume and see what happens? –  EightBitTony Jul 3 '11 at 18:44
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2 Answers

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No, you can not nest hidden volumes within Truecrypt. It's a single hidden volume per encrypted volume only.

Relevant documentation is here. If you step through the process you'll see that you have to open an encrypted volume, and create the hidden volume. At that point, it overwrites the hidden volume header area with details of the new single hidden volume, essentially obliterating the previous one.

You can nest non-hidden volumes obviously, as much as you like (so a file within a volume is actually another volume) but clearly that's harder to deny.

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If it is possible to make non-hidden volumes inside a hidden volume container and one non-hidden container can contain one hidden container, then it should be possible to nest.

But the procedure would be to not make two hidden volumes in one non-hidden volume,

  • Make non-hidden container
    • One hidden vol inside this
      • Make a non-hidden container inside above hidden volume
      • Make a hidden volume inside above container
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