diff --git a/README.md b/README.md
index dc7e7422..12cebd2e 100644
--- a/README.md
+++ b/README.md
@@ -67,7 +67,7 @@ To see all the available options, run `tox -l`.
 
 ## Releasing
 
-To create a new releaes go to Releases page, press 'Draft a new release', create a tag
+To create a new release go to Releases page, press 'Draft a new release', create a tag
 with a version you want to be released, fill the release notes and press 'Publish release'.
 Github actions will take care of publishing it to PyPi.
 
@@ -84,3 +84,23 @@ We welcome pull requests! For your pull request to be accepted smoothly, we sugg
 - Create a pull request.  Explain why you want to make the change and what it’s for.
 
 We’ll try to answer any PR’s promptly.
+
+## Limitations
+
+### Error parsing string interpolations nested more than 2 times
+
+- Parsing following example is expected to throw out an exception and fail:
+  ```terraform
+  locals {
+    foo = "foo"
+    name = "prefix1-${"prefix2-${"${local.foo}-bar"}"}" //should interpolate into "prefix1-prefix2-foo-bar" but fails
+  }
+  ```
+  We recommend working around this by modifying the configuration in the following manner:
+  ```terraform
+  locals {
+    foo = "foo"
+    foo_bar = "${local.foo}-bar"
+    name = "prefix1-${"prefix2-${local.foo_bar}"}" //interpolates into "prefix1-prefix2-foo-bar"
+  }
+  ```
diff --git a/hcl2/hcl2.lark b/hcl2/hcl2.lark
index 06cccfd1..0f5437fc 100644
--- a/hcl2/hcl2.lark
+++ b/hcl2/hcl2.lark
@@ -1,7 +1,7 @@
 start : body
 body : (new_line_or_comment? (attribute | block))* new_line_or_comment?
 attribute : identifier EQ expression
-block : identifier (identifier | STRING_LIT | string_with_interpolation)* new_line_or_comment? "{" body "}"
+block : identifier (identifier | STRING_LIT)* new_line_or_comment? "{" body "}"
 new_line_or_comment: ( NL_OR_COMMENT )+
 NL_OR_COMMENT: /\n[ \t]*/ | /#.*\n/ | /\/\/.*\n/ | /\/\*(.|\n)*?(\*\/)/
 
@@ -42,7 +42,6 @@ expr_term : LPAR new_line_or_comment? expression new_line_or_comment? RPAR
             | float_lit
             | int_lit
             | STRING_LIT
-            | string_with_interpolation
             | tuple
             | object
             | function_call
@@ -57,10 +56,11 @@ expr_term : LPAR new_line_or_comment? expression new_line_or_comment? RPAR
             | for_tuple_expr
             | for_object_expr
 
-STRING_LIT : "\"" STRING_CHARS? "\""
-STRING_CHARS : /(?:(?!\${)([^"\\]|\\.))+/ // any character except '"'
-string_with_interpolation: "\"" (STRING_CHARS)* interpolation_maybe_nested (STRING_CHARS | interpolation_maybe_nested)* "\""
-interpolation_maybe_nested: "${" expression "}"
+STRING_LIT : "\"" (STRING_CHARS | INTERPOLATION)* "\""
+STRING_CHARS : /(?:(?!\${)([^"\\]|\\.))+/+ // any character except '"" unless inside a interpolation string
+NESTED_INTERPOLATION : "${" /[^}]+/ "}"
+INTERPOLATION : "${" (/(?:(?!\${)([^}]))+/ | NESTED_INTERPOLATION)+ "}"
+
 
 int_lit : NEGATIVE_DECIMAL? DECIMAL+ | NEGATIVE_DECIMAL+
 !float_lit: (NEGATIVE_DECIMAL? DECIMAL+ | NEGATIVE_DECIMAL+) "." DECIMAL+ (EXP_MARK)?
diff --git a/test/helpers/terraform-config-json/locals_embedded_interpolation.json b/test/helpers/terraform-config-json/locals_embedded_interpolation.json
deleted file mode 100644
index 8732531f..00000000
--- a/test/helpers/terraform-config-json/locals_embedded_interpolation.json
+++ /dev/null
@@ -1,7 +0,0 @@
-{
-  "locals": [
-    {
-      "embedded_interpolation": "(long substring without interpolation); ${module.special_constants.aws_accounts[\"aaa-${local.foo}-${local.bar}\"]}/us-west-2/key_foo"
-    }
-  ]
-}
diff --git a/test/helpers/terraform-config-json/multi_level_interpolation.json b/test/helpers/terraform-config-json/multi_level_interpolation.json
deleted file mode 100644
index ab2af720..00000000
--- a/test/helpers/terraform-config-json/multi_level_interpolation.json
+++ /dev/null
@@ -1,10 +0,0 @@
-{
-    "block": [
-        {
-            "a": "${\"${\"${\"a\"}\"}\"}"
-        },
-        {
-            "b": "${var.b}"
-        }
-    ]
-}
diff --git a/test/helpers/terraform-config-json/string_interpolations.json b/test/helpers/terraform-config-json/string_interpolations.json
new file mode 100644
index 00000000..76bd5454
--- /dev/null
+++ b/test/helpers/terraform-config-json/string_interpolations.json
@@ -0,0 +1 @@
+{"locals": [{"simple_interpolation": "prefix:${var.foo}-suffix", "embedded_interpolation": "(long substring without interpolation); ${module.special_constants.aws_accounts[\"aaa-${local.foo}-${local.bar}\"]}/us-west-2/key_foo", "escaped_interpolation": "prefix:$${aws:username}-suffix"}]}
diff --git a/test/helpers/terraform-config/multi_level_interpolation.tf b/test/helpers/terraform-config/multi_level_interpolation.tf
deleted file mode 100644
index ab42c736..00000000
--- a/test/helpers/terraform-config/multi_level_interpolation.tf
+++ /dev/null
@@ -1,7 +0,0 @@
-block {
-  a = "${"${"${"a"}"}"}"
-}
-
-block {
-  b = "${var.b}"
-}
diff --git a/test/helpers/terraform-config/locals_embedded_interpolation.tf b/test/helpers/terraform-config/string_interpolations.tf
similarity index 60%
rename from test/helpers/terraform-config/locals_embedded_interpolation.tf
rename to test/helpers/terraform-config/string_interpolations.tf
index 2a89f595..eed3be33 100644
--- a/test/helpers/terraform-config/locals_embedded_interpolation.tf
+++ b/test/helpers/terraform-config/string_interpolations.tf
@@ -1,3 +1,5 @@
 locals {
+  simple_interpolation = "prefix:${var.foo}-suffix"
   embedded_interpolation = "(long substring without interpolation); ${module.special_constants.aws_accounts["aaa-${local.foo}-${local.bar}"]}/us-west-2/key_foo"
+  escaped_interpolation = "prefix:$${aws:username}-suffix"
 }
diff --git a/test/unit/test_builder.py b/test/unit/test_builder.py
index 56d7e308..ec9d7fac 100644
--- a/test/unit/test_builder.py
+++ b/test/unit/test_builder.py
@@ -64,14 +64,16 @@ def test_locals_embedded_function_tf(self):
     def test_locals_embedded_interpolation_tf(self):
         builder = hcl2.Builder()
 
-        embedded_interpolation = (
-            "(long substring without interpolation); ${module.special_constants.aws_accounts"
-            '["aaa-${local.foo}-${local.bar}"]}/us-west-2/key_foo'
-        )
+        attributes = {
+            "simple_interpolation": "prefix:${var.foo}-suffix",
+            "embedded_interpolation": "(long substring without interpolation); "
+            '${module.special_constants.aws_accounts["aaa-${local.foo}-${local.bar}"]}/us-west-2/key_foo',
+            "escaped_interpolation": "prefix:$${aws:username}-suffix",
+        }
 
-        builder.block("locals", embedded_interpolation=embedded_interpolation)
+        builder.block("locals", **attributes)
 
-        self.compare_filenames(builder, "locals_embedded_interpolation.tf")
+        self.compare_filenames(builder, "string_interpolations.tf")
 
     def test_provider_function_tf(self):
         builder = hcl2.Builder()