Use the same process. You already have the variable iDiv which still refers to the original element <div id='block'> you've created. You just need to create another <div> and call appendChild().
// Your existing code unmodified...
var iDiv = document.createElement('div');
iDiv.id = 'block';
iDiv.className = 'block';
document.getElementsByTagName('body')[0].appendChild(iDiv);
// Now create and append to iDiv
var innerDiv = document.createElement('div');
innerDiv.className = 'block-2';
// The variable iDiv is still good... Just append to it.
iDiv.appendChild(innerDiv);
http://jsfiddle.net/W4Sup/1/
The order of event creation doesn't have to be as I have it above. You can alternately append the new innerDiv to the outer div before you add both to the <body>.
var iDiv = document.createElement('div');
iDiv.id = 'block';
iDiv.className = 'block';
// Create the inner div before appending to the body
var innerDiv = document.createElement('div');
innerDiv.className = 'block-2';
// The variable iDiv is still good... Just append to it.
iDiv.appendChild(innerDiv);
// Then append the whole thing onto the body
document.getElementsByTagName('body')[0].appendChild(iDiv);