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  • An nested class has access to the variables and methods of its enclosing class, and it can be private to the enclosing class. That's a completely different kind of sharing and encapsulation compared to a separate class. Which you chose depends on what you need. Consider a Listener class in … Read More

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An nested class has access to the variables and methods of its enclosing class, and it can be private to the enclosing class. That's a completely different kind of sharing and encapsulation compared to a separate class. Which you chose depends on what you need.
Consider a Listener class in Swing. You want it to have access to the components of the GUI, but you don't want anyone lese messing with it.

Oracle has a good tutorial on this subject right here

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Most situations call for an ordinary class.
Nested classes are good for event listeners, and for little data structures used inside a class, eg Linked List classes may have an inner Entry class that encapsulates the data and the link. Just ask the two questions:
Is this class needed outside the main class?
Does this class need access to the main class's variables?

Edited by JamesCherrill

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