This simple patch kindly provided by Marco solves the problem.

Regression tested on x86_64-Linux, Test case provided also.

OK to commit to trunk?

Jerry

2016-07-14  Jerry DeLisle  <jvdeli...@gcc.gnu.org>
            Marco Restelli <mreste...@gmail.com>

        PR fortran/62125
        * symbol.c (select_type_insert_tmp): Recursively call self to take care
        of nested select type.

diff --git a/gcc/fortran/symbol.c b/gcc/fortran/symbol.c
index 0ee7dec..c967f25 100644
--- a/gcc/fortran/symbol.c
+++ b/gcc/fortran/symbol.c
@@ -2930,7 +2930,11 @@ select_type_insert_tmp (gfc_symtree **st)
   gfc_select_type_stack *stack = select_type_stack;
   for (; stack; stack = stack->prev)
     if ((*st)->n.sym == stack->selector && stack->tmp)
-      *st = stack->tmp;
+      {
+        *st = stack->tmp;
+        select_type_insert_tmp (st);
+        return;
+      }
 }
! { dg-do run }
! PR62125  Nested select type not accepted (rejects valid) 
module m
 implicit none
 type, abstract :: t1
  logical :: l
 end type t1
 type, extends(t1), abstract :: t2
  integer :: i
 end type t2
 type, extends(t2) :: t3
  real :: x
 end type t3
contains
 subroutine s(u)
  class(t1), intent(in) :: u
  if(.not.u%l) call abort()
   select type(u); class is(t2)
     if(u%i.ne.2) call abort()
     select type(u); class is(t3)
       if(u%x.ne.3.5) call abort()
     end select
   end select
 end subroutine s
end module m

program p
 use m
 implicit none
 type(t3) :: var = t3( l=.true. , i=2 , x=3.5 )
 call s(var)
end program p

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