Chestnut Saplings are a nut bearing tree that reproduce Chestnuts.
1.9.4 and Newer: Combine Three (3) Chestnuts and ANY Sapling.
1.7.10 and older: Combine one (1) Chestnut with an Oak Sapling
Plant the sapling as normal. When the nut has ripened right-click to harvest the Chestnut. Do not left-click as it will permanently break the nut.
Bonemeal can be used to ripen the nut and grow the sapling into a tree.