diff --git a/client/modules/IDE/actions/files.js b/client/modules/IDE/actions/files.js
index b436034ea9..dffd109c74 100644
--- a/client/modules/IDE/actions/files.js
+++ b/client/modules/IDE/actions/files.js
@@ -26,6 +26,7 @@ function createUniqueName(name, parentId, files) {
     index += 1;
     existingName = siblingFiles.find((file) => testName === file.name); // eslint-disable-line
   }
+  console.log(testName);
   return testName;
 }
 
@@ -43,14 +44,68 @@ export function createFile(formProps) {
     const selectedFile = state.files.find(file => file.isSelectedFile);
     const rootFile = state.files.find(file => file.name === 'root');
     let parentId;
+    const relativePath = formProps.name;
+    const relativePathSplit = relativePath.split('/');
+    const parentFolders = relativePath.length === 1 ? [] : relativePathSplit.slice(0, -1);
+    const fileName = relativePathSplit.slice(-1)[0];
     if (selectedFile.fileType === 'folder') {
       parentId = selectedFile.id;
     } else {
       parentId = rootFile.id;
     }
+    parentId = parentFolders.reduce((parentFolderId, currentFolderName) => {
+      const { files } = state;
+      const parentFolderObject = files.find(file => file.id === parentFolderId);
+      const childFoldersObject = parentFolderObject.children
+        .map(childFileId => files.find(file => file.id === childFileId));
+      const currentFolderObject = childFoldersObject.find(childFile => childFile.name === currentFolderName);
+      const currentFolderId = currentFolderObject ? currentFolderObject.id : undefined;
+
+      if (!currentFolderId) {
+        if (state.project.id) {
+          const postParams = {
+            name: createUniqueName(currentFolderName, parentFolderId, getState().files),
+            content: '',
+            children: [],
+            parentId: parentFolderId,
+            fileType: 'folder'
+          };
+          axios.post(`${ROOT_URL}/projects/${state.project.id}/files`, postParams, { withCredentials: true })
+            .then((response) => {
+              dispatch({
+                type: ActionTypes.CREATE_FILE,
+                ...response.data,
+                parentId: parentFolderId
+              });
+            })
+            .catch(response => dispatch({
+              type: ActionTypes.ERROR,
+              error: response.data
+            }));
+          /* return __; */
+        } else {
+          const id = objectID().toHexString();
+          dispatch({
+            type: ActionTypes.CREATE_FILE,
+            name: createUniqueName(currentFolderName, parentFolderId, getState().files),
+            /* name: currentFolderName, */
+            id,
+            _id: id,
+            content: '',
+            // TODO pass parent id from File Tree
+            parentId: parentFolderId,
+            fileType: 'folder',
+            children: []
+          });
+          return id;
+        }
+      }
+      return currentFolderId;
+    }, parentId);
+    console.log(parentId);
     if (state.project.id) {
       const postParams = {
-        name: createUniqueName(formProps.name, parentId, state.files),
+        name: createUniqueName(fileName, parentId, getState().files),
         url: formProps.url,
         content: formProps.content || '',
         parentId,
@@ -77,7 +132,7 @@ export function createFile(formProps) {
       const id = objectID().toHexString();
       dispatch({
         type: ActionTypes.CREATE_FILE,
-        name: createUniqueName(formProps.name, parentId, state.files),
+        name: createUniqueName(fileName, parentId, getState().files),
         id,
         _id: id,
         url: formProps.url,
@@ -100,14 +155,66 @@ export function createFolder(formProps) {
     const selectedFile = state.files.find(file => file.isSelectedFile);
     const rootFile = state.files.find(file => file.name === 'root');
     let parentId;
+    const relativePath = formProps.name;
+    const relativePathSplit = relativePath.split('/');
+    const parentFolders = relativePath.length === 1 ? [] : relativePathSplit.slice(0, -1);
+    const fileName = relativePathSplit.slice(-1)[0];
     if (selectedFile.fileType === 'folder') {
       parentId = selectedFile.id;
     } else {
       parentId = rootFile.id;
     }
+    parentId = parentFolders.reduce((parentFolderId, currentFolderName) => {
+      const { files } = state;
+      const parentFolderObject = files.find(file => file.id === parentFolderId);
+      const childFoldersObject = parentFolderObject.children
+        .map(childFileId => files.find(file => file.id === childFileId));
+      const currentFolderObject = childFoldersObject.find(childFile => childFile.name === currentFolderName);
+      const currentFolderId = currentFolderObject ? currentFolderObject.id : undefined;
+
+      if (!currentFolderId) {
+        if (state.project.id) {
+          const postParams = {
+            name: createUniqueName(currentFolderName, parentFolderId, getState().files),
+            content: '',
+            children: [],
+            parentId: parentFolderId,
+            fileType: 'folder'
+          };
+          axios.post(`${ROOT_URL}/projects/${state.project.id}/files`, postParams, { withCredentials: true })
+            .then((response) => {
+              dispatch({
+                type: ActionTypes.CREATE_FILE,
+                ...response.data,
+                parentId: parentFolderId
+              });
+            })
+            .catch(response => dispatch({
+              type: ActionTypes.ERROR,
+              error: response.data
+            }));
+          /* return __; */
+        } else {
+          const id = objectID().toHexString();
+          dispatch({
+            type: ActionTypes.CREATE_FILE,
+            name: createUniqueName(currentFolderName, parentFolderId, getState().files),
+            id,
+            _id: id,
+            content: '',
+            // TODO pass parent id from File Tree
+            parentId: parentFolderId,
+            fileType: 'folder',
+            children: []
+          });
+          return id;
+        }
+      }
+      return currentFolderId;
+    }, parentId);
     if (state.project.id) {
       const postParams = {
-        name: createUniqueName(formProps.name, parentId, state.files),
+        name: createUniqueName(fileName, parentId, getState().files),
         content: '',
         children: [],
         parentId,
@@ -132,7 +239,7 @@ export function createFolder(formProps) {
       const id = objectID().toHexString();
       dispatch({
         type: ActionTypes.CREATE_FILE,
-        name: createUniqueName(formProps.name, parentId, state.files),
+        name: createUniqueName(fileName, parentId, getState().files),
         id,
         _id: id,
         content: '',