Magento2 out of the box nginx config file has got some issues. This file has got the fixes. with comment text #The setup fix

magnto2-nginx-fix.conf

## Example configuration:
# upstream fastcgi_backend {
#    # use tcp connection
#    # server  127.0.0.1:9000;
#    # or socket
#    server   unix:/var/run/php5-fpm.sock;
#    server   unix:/var/run/php/php7.0-fpm.sock;
# }
# server {
#    listen 80;
#    server_name mage.dev;
#    set $MAGE_ROOT /var/www/magento2;
#    include /vagrant/magento2/nginx.conf.sample;
# }
#
## Optional override of deployment mode. We recommend you use the
## command 'bin/magento deploy:mode:set' to switch modes instead.
##
## set $MAGE_MODE default; # or production or developer
##
## If you set MAGE_MODE in server config, you must pass the variable into the
## PHP entry point blocks, which are indicated below. You can pass
## it in using:
##
## fastcgi_param  MAGE_MODE $MAGE_MODE;
##
## In production mode, you should uncomment the 'expires' directive in the /static/ location block

root $MAGE_ROOT/pub;

index index.php;
autoindex off;
charset UTF-8;
error_page 404 403 = /errors/404.php;
#add_header "X-UA-Compatible" "IE=Edge";

# PHP entry point for setup application
location ~* ^/setup($|/) {
    root $MAGE_ROOT;
    location ~ ^/setup/index.php {
        #The setup fix
        fastcgi_split_path_info ^(.+?\.php)(/.*)$;
        #End the setup fix
        fastcgi_pass   fastcgi_backend;

        fastcgi_param  PHP_FLAG  "session.auto_start=off \n suhosin.session.cryptua=off";
        fastcgi_param  PHP_VALUE "memory_limit=756M \n max_execution_time=600";
        fastcgi_read_timeout 600s;
        fastcgi_connect_timeout 600s;

        fastcgi_index  index.php;
        fastcgi_param  SCRIPT_FILENAME  $document_root$fastcgi_script_name;
        include        fastcgi_params;
    }

    location ~ ^/setup/(?!pub/). {
        deny all;
    }

    location ~ ^/setup/pub/ {
        add_header X-Frame-Options "SAMEORIGIN";
    }
}

# PHP entry point for update application
location ~* ^/update($|/) {
    root $MAGE_ROOT;

    location ~ ^/update/index.php {
        fastcgi_split_path_info ^(/update/index.php)(/.+)$;
        fastcgi_pass   fastcgi_backend;
        fastcgi_index  index.php;
        fastcgi_param  SCRIPT_FILENAME  $document_root$fastcgi_script_name;
        fastcgi_param  PATH_INFO        $fastcgi_path_info;
        include        fastcgi_params;
    }

    # Deny everything but index.php
    location ~ ^/update/(?!pub/). {
        deny all;
    }

    location ~ ^/update/pub/ {
        add_header X-Frame-Options "SAMEORIGIN";
    }
}

location / {
    try_files $uri $uri/ /index.php$is_args$args;
}

location /pub/ {
    location ~ ^/pub/media/(downloadable|customer|import|theme_customization/.*\.xml) {
        deny all;
    }
    alias $MAGE_ROOT/pub/;
    add_header X-Frame-Options "SAMEORIGIN";
}

location /static/ {
    # Uncomment the following line in production mode
    # expires max;

    # Remove signature of the static files that is used to overcome the browser cache
    location ~ ^/static/version {
        rewrite ^/static/(version[^/]+/)?(.*)$ /static/$2 last;
    }

    location ~* \.(ico|jpg|jpeg|png|gif|svg|js|css|swf|eot|ttf|otf|woff|woff2)$ {
        add_header Cache-Control "public";
        add_header X-Frame-Options "SAMEORIGIN";
        expires +1y;

        if (!-f $request_filename) {
            rewrite ^/static/?(.*)$ /static.php?resource=$1 last;
        }
    }
    location ~* \.(zip|gz|gzip|bz2|csv|xml)$ {
        add_header Cache-Control "no-store";
        add_header X-Frame-Options "SAMEORIGIN";
        expires    off;

        if (!-f $request_filename) {
           rewrite ^/static/?(.*)$ /static.php?resource=$1 last;
        }
    }
    if (!-f $request_filename) {
        rewrite ^/static/?(.*)$ /static.php?resource=$1 last;
    }
    add_header X-Frame-Options "SAMEORIGIN";
}

location /media/ {
    try_files $uri $uri/ /get.php$is_args$args;

    location ~ ^/media/theme_customization/.*\.xml {
        deny all;
    }

    location ~* \.(ico|jpg|jpeg|png|gif|svg|js|css|swf|eot|ttf|otf|woff|woff2)$ {
        add_header Cache-Control "public";
        add_header X-Frame-Options "SAMEORIGIN";
        expires +1y;
        try_files $uri $uri/ /get.php$is_args$args;
    }
    location ~* \.(zip|gz|gzip|bz2|csv|xml)$ {
        add_header Cache-Control "no-store";
        add_header X-Frame-Options "SAMEORIGIN";
        expires    off;
        try_files $uri $uri/ /get.php$is_args$args;
    }
    add_header X-Frame-Options "SAMEORIGIN";
}

location /media/customer/ {
    deny all;
}

location /media/downloadable/ {
    deny all;
}

location /media/import/ {
    deny all;
}

# PHP entry point for main application
location ~ (index|get|static|report|404|503|health_check)\.php$ {
    try_files $uri =404;
    fastcgi_pass   fastcgi_backend;
    fastcgi_buffers 1024 4k;

    fastcgi_param  PHP_FLAG  "session.auto_start=off \n suhosin.session.cryptua=off";
    fastcgi_param  PHP_VALUE "memory_limit=756M \n max_execution_time=18000";
    fastcgi_read_timeout 600s;
    fastcgi_connect_timeout 600s;

    fastcgi_index  index.php;
    fastcgi_param  SCRIPT_FILENAME  $document_root$fastcgi_script_name;
    include        fastcgi_params;
}

gzip on;
gzip_disable "msie6";

gzip_comp_level 6;
gzip_min_length 1100;
gzip_buffers 16 8k;
gzip_proxied any;
gzip_types
    text/plain
    text/css
    text/js
    text/xml
    text/javascript
    application/javascript
    application/x-javascript
    application/json
    application/xml
    application/xml+rss
    image/svg+xml;
gzip_vary on;

# Banned locations (only reached if the earlier PHP entry point regexes don't match)
location ~* (\.php$|\.htaccess$|\.git) {
    deny all;
}