diff --git a/docs/release_notes.rst b/docs/release_notes.rst
index 2e93350c..3d72549f 100644
--- a/docs/release_notes.rst
+++ b/docs/release_notes.rst
@@ -33,6 +33,8 @@ Bug Fixes
 * Fix decorator parsing (#411).
 * Google-style sections no longer cause false errors when used with
   Numpy-style sections (#388, #424).
+* D202: Allow a blank line after function docstring when followed by
+  declaration of an inner function or class (#395, #426).
 * Fix D401 and D404 checks not working for docstrings containing only one word and ending with non-alpha character (#421)
 
 4.0.1 - August 14th, 2019
@@ -48,7 +50,6 @@ Bug Fixes
   the violation code table (#396).
 * Fixed IndentationError when parsing function arguments (#392).
 
-
 4.0.0 - July 6th, 2019
 ----------------------
 
diff --git a/src/pydocstyle/checker.py b/src/pydocstyle/checker.py
index 7de79ffc..52626fe9 100644
--- a/src/pydocstyle/checker.py
+++ b/src/pydocstyle/checker.py
@@ -186,8 +186,8 @@ def check_one_liners(self, definition, docstring):
     def check_no_blank_before(self, function, docstring):  # def
         """D20{1,2}: No blank lines allowed around function/method docstring.
 
-        There's no blank line either before or after the docstring.
-
+        There's no blank line either before or after the docstring unless directly
+        followed by an inner function or class.
         """
         if docstring:
             before, _, after = function.source.partition(docstring)
@@ -198,7 +198,14 @@ def check_no_blank_before(self, function, docstring):  # def
             if blanks_before_count != 0:
                 yield violations.D201(blanks_before_count)
             if not all(blanks_after) and blanks_after_count != 0:
-                yield violations.D202(blanks_after_count)
+                # Report a D202 violation if the docstring is followed by a blank line
+                # and the blank line is not itself followed by an inner function or
+                # class.
+                if not (
+                    blanks_after_count == 1 and
+                    re(r"\s+(?:(?:class|def)\s|@)").match(after)
+                ):
+                    yield violations.D202(blanks_after_count)
 
     @check_for(Class)
     def check_blank_before_after_class(self, class_, docstring):
@@ -976,7 +983,7 @@ def is_ascii(string):
 
 def leading_space(string):
     """Return any leading space from `string`."""
-    return re('\s*').match(string).group()
+    return re(r'\s*').match(string).group()
 
 
 def get_leading_words(line):
@@ -984,7 +991,7 @@ def get_leading_words(line):
 
     For example, if `line` is "  Hello world!!!", returns "Hello world".
     """
-    result = re("[\w ]+").match(line.strip())
+    result = re(r"[\w ]+").match(line.strip())
     if result is not None:
         return result.group()
 
diff --git a/src/tests/test_cases/functions.py b/src/tests/test_cases/functions.py
new file mode 100644
index 00000000..cbc24268
--- /dev/null
+++ b/src/tests/test_cases/functions.py
@@ -0,0 +1,53 @@
+"""A valid module docstrings."""
+
+from .expected import Expectation
+
+expectation = Expectation()
+expect = expectation.expect
+
+
+@expect("D201: No blank lines allowed before function docstring (found 1)")
+def func_with_space_before():
+
+    """Test a function with space before docstring."""
+    pass
+
+
+@expect("D202: No blank lines allowed after function docstring (found 1)")
+def func_with_space_after():
+    """Test a function with space after docstring."""
+
+    pass
+
+
+def func_with_inner_func_after():
+    """Test a function with inner function after docstring."""
+
+    def inner():
+        pass
+
+    pass
+
+
+def fake_decorator(decorated):
+    """Fake decorator used to test decorated inner func."""
+    return decorated
+
+
+def func_with_inner_decorated_func_after():
+    """Test a function with inner decorated function after docstring."""
+
+    @fake_decorator
+    def inner():
+        pass
+
+    pass
+
+
+def func_with_inner_class_after():
+    """Test a function with inner class after docstring."""
+
+    class inner():
+        pass
+
+    pass
diff --git a/src/tests/test_definitions.py b/src/tests/test_definitions.py
index 1bbbca81..83109b5a 100644
--- a/src/tests/test_definitions.py
+++ b/src/tests/test_definitions.py
@@ -19,6 +19,7 @@
     'superfluous_quotes',
     'noqa',
     'sections',
+    'functions',
     'canonical_google_examples',
     'canonical_numpy_examples',
     'canonical_pep257_examples',