Added test was still failing and implemented solution as described in #517

mongoengine/base/fields.py

@@ -290,6 +290,7 @@ class ComplexBaseField(BaseField):
                 return value
 
         if self.field:
+            self.field._auto_dereference = self._auto_dereference
             value_dict = dict([(key, self.field.to_python(item))
                                for key, item in value.items()])
         else:

mongoengine/fields.py

@@ -546,7 +546,7 @@ class EmbeddedDocumentField(BaseField):
 
     def to_python(self, value):
         if not isinstance(value, self.document_type):
-            return self.document_type._from_son(value)
+            return self.document_type._from_son(value, _auto_dereference=self._auto_dereference)
         return value
 
     def to_mongo(self, value, use_db_field=True, fields=[]):