diff --git a/backend/server/src/index.ts b/backend/server/src/index.ts
index 4f45cbe..a8ddc0a 100644
--- a/backend/server/src/index.ts
+++ b/backend/server/src/index.ts
@@ -23,6 +23,7 @@ import { IDisposable, IPty, spawn } from "node-pty"
 import {
   MAX_BODY_SIZE,
   createFileRL,
+  createFolderRL,
   deleteFileRL,
   renameFileRL,
   saveFileRL,
@@ -222,6 +223,22 @@ io.on("connection", async (socket) => {
     }
   })
 
+  socket.on("createFolder", async (name: string, callback) => {
+    try {
+      await createFolderRL.consume(data.userId, 1)
+
+      const id = `projects/${data.sandboxId}/${name}`
+
+      fs.mkdir(path.join(dirName, id), { recursive: true }, function (err) {
+        if (err) throw err
+      })
+
+      callback()
+    } catch (e) {
+      io.emit("rateLimit", "Rate limited: folder creation. Please slow down.")
+    }
+  })
+
   socket.on("renameFile", async (fileId: string, newName: string) => {
     try {
       await renameFileRL.consume(data.userId, 1)
@@ -277,8 +294,6 @@ io.on("connection", async (socket) => {
   socket.on("deleteFolder", async (folderId: string, callback) => {
     const files = await getFolder(folderId)
 
-    console.log("deleting folder", folderId, files)
-    
     await Promise.all(files.map(async (file) => {
       fs.unlink(path.join(dirName, file), function (err) {
         if (err) throw err
diff --git a/backend/server/src/ratelimit.ts b/backend/server/src/ratelimit.ts
index a199e03..f0d99fa 100644
--- a/backend/server/src/ratelimit.ts
+++ b/backend/server/src/ratelimit.ts
@@ -12,6 +12,11 @@ export const createFileRL = new RateLimiterMemory({
   duration: 2,
 })
 
+export const createFolderRL = new RateLimiterMemory({
+  points: 1,
+  duration: 2,
+})
+
 export const renameFileRL = new RateLimiterMemory({
   points: 1,
   duration: 2,
diff --git a/frontend/components/editor/index.tsx b/frontend/components/editor/index.tsx
index 3ff0949..493b5a0 100644
--- a/frontend/components/editor/index.tsx
+++ b/frontend/components/editor/index.tsx
@@ -23,7 +23,7 @@ import Tab from "../ui/tab";
 import Sidebar from "./sidebar";
 import GenerateInput from "./generate";
 import { Sandbox, User, TFile, TFolder, TTab } from "@/lib/types";
-import { processFileType, validateName } from "@/lib/utils";
+import { addNew, processFileType, validateName } from "@/lib/utils";
 import { Cursors } from "./live/cursors";
 import { Terminal } from "@xterm/xterm";
 import DisableAccessModal from "./live/disableModal";
@@ -615,17 +615,7 @@ export default function CodeEditor({
         handleDeleteFolder={handleDeleteFolder}
         socket={socket}
         setFiles={setFiles}
-        addNew={(name, type) => {
-          if (type === "file") {
-            setFiles((prev) => [
-              ...prev,
-              { id: `projects/${sandboxData.id}/${name}`, name, type: "file" },
-            ]);
-          } else {
-            console.log("adding folder");
-            // setFiles(prev => [...prev, { id, name, type: "folder", children: [] }])
-          }
-        }}
+        addNew={(name, type) => addNew(name, type, setFiles, sandboxData)}
         deletingFolderId={deletingFolderId}
         // AI Copilot Toggle
         ai={ai}
diff --git a/frontend/components/editor/sidebar/index.tsx b/frontend/components/editor/sidebar/index.tsx
index 909f3b5..2720a1d 100644
--- a/frontend/components/editor/sidebar/index.tsx
+++ b/frontend/components/editor/sidebar/index.tsx
@@ -81,7 +81,6 @@ export default function Sidebar({
 
         const fileFolder = fileId.split("/").slice(0, -1).join("/");
         if (fileFolder === folderId) {
-          console.log("NO");
           return;
         }
 
diff --git a/frontend/components/editor/sidebar/new.tsx b/frontend/components/editor/sidebar/new.tsx
index 491fc25..6997586 100644
--- a/frontend/components/editor/sidebar/new.tsx
+++ b/frontend/components/editor/sidebar/new.tsx
@@ -18,7 +18,7 @@ export default function New({
 }) {
   const inputRef = useRef<HTMLInputElement>(null);
 
-  const createNew = () => {
+  function createNew() {
     const name = inputRef.current?.value;
 
     if (name) {
@@ -34,11 +34,15 @@ export default function New({
               }
             }
           );
+        } else {
+          socket.emit("createFolder", name, () => {
+            addNew(name, type);
+          });
         }
       }
     }
     stopEditing();
-  };
+  }
 
   useEffect(() => {
     inputRef.current?.focus();
diff --git a/frontend/lib/utils.ts b/frontend/lib/utils.ts
index 1cf63b8..f5f0c65 100644
--- a/frontend/lib/utils.ts
+++ b/frontend/lib/utils.ts
@@ -1,6 +1,7 @@
 import { type ClassValue, clsx } from "clsx"
 // import { toast } from "sonner"
 import { twMerge } from "tailwind-merge"
+import { Sandbox, TFile, TFolder } from "./types"
 
 export function cn(...inputs: ClassValue[]) {
   return twMerge(clsx(inputs))
@@ -35,3 +36,15 @@ export function validateName(
   }
   return { status: true, message: "" }
 }
+
+export function addNew(name: string, type: "file" | "folder", setFiles: React.Dispatch<React.SetStateAction<(TFolder | TFile)[]>>, sandboxData: Sandbox) {
+  if (type === "file") {
+    setFiles((prev) => [
+      ...prev,
+      { id: `projects/${sandboxData.id}/${name}`, name, type: "file" },
+    ]);
+  } else {
+    console.log("adding folder");
+    setFiles(prev => [...prev, { id: `projects/${sandboxData.id}/${name}`, name, type: "folder", children: [] }])
+  }
+}
\ No newline at end of file