diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditNavigation.kt b/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditNavigation.kt
index 369b9de617..ff9dec921e 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditNavigation.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditNavigation.kt
@@ -13,12 +13,14 @@ import com.x8bit.bitwarden.ui.platform.feature.settings.folders.model.FolderAddE
 private const val ADD_TYPE: String = "add"
 private const val EDIT_TYPE: String = "edit"
 private const val EDIT_ITEM_ID: String = "folder_edit_id"
+private const val PARENT_FOLDER_NAME: String = "parent_folder_name"
 
 private const val ADD_EDIT_ITEM_PREFIX: String = "folder_add_edit_item"
 private const val ADD_EDIT_ITEM_TYPE: String = "folder_add_edit_type"
 
 private const val ADD_EDIT_ITEM_ROUTE: String =
-    "$ADD_EDIT_ITEM_PREFIX/{$ADD_EDIT_ITEM_TYPE}?$EDIT_ITEM_ID={$EDIT_ITEM_ID}"
+    "$ADD_EDIT_ITEM_PREFIX/{$ADD_EDIT_ITEM_TYPE}" +
+        "?$EDIT_ITEM_ID={$EDIT_ITEM_ID}&$PARENT_FOLDER_NAME={$PARENT_FOLDER_NAME}"
 
 /**
  * Class to retrieve folder add & edit arguments from the [SavedStateHandle].
@@ -26,6 +28,7 @@ private const val ADD_EDIT_ITEM_ROUTE: String =
 @OmitFromCoverage
 data class FolderAddEditArgs(
     val folderAddEditType: FolderAddEditType,
+    val parentFolderName: String?,
 ) {
     constructor(savedStateHandle: SavedStateHandle) : this(
         folderAddEditType = when (requireNotNull(savedStateHandle[ADD_EDIT_ITEM_TYPE])) {
@@ -33,13 +36,13 @@ data class FolderAddEditArgs(
             EDIT_TYPE -> FolderAddEditType.EditItem(requireNotNull(savedStateHandle[EDIT_ITEM_ID]))
             else -> throw IllegalStateException("Unknown FolderAddEditType.")
         },
+        parentFolderName = savedStateHandle[PARENT_FOLDER_NAME],
     )
 }
 
 /**
  * Add the folder add & edit screen to the nav graph.
  */
-@Suppress("LongParameterList")
 fun NavGraphBuilder.folderAddEditDestination(
     onNavigateBack: () -> Unit,
 ) {
@@ -47,6 +50,14 @@ fun NavGraphBuilder.folderAddEditDestination(
         route = ADD_EDIT_ITEM_ROUTE,
         arguments = listOf(
             navArgument(ADD_EDIT_ITEM_TYPE) { type = NavType.StringType },
+            navArgument(EDIT_ITEM_ID) {
+                nullable = true
+                type = NavType.StringType
+            },
+            navArgument(PARENT_FOLDER_NAME) {
+                nullable = true
+                type = NavType.StringType
+            },
         ),
     ) {
         FolderAddEditScreen(onNavigateBack = onNavigateBack)
@@ -58,11 +69,13 @@ fun NavGraphBuilder.folderAddEditDestination(
  */
 fun NavController.navigateToFolderAddEdit(
     folderAddEditType: FolderAddEditType,
+    parentFolderName: String? = null,
     navOptions: NavOptions? = null,
 ) {
     navigate(
         route = "$ADD_EDIT_ITEM_PREFIX/${folderAddEditType.toTypeString()}" +
-            "?$EDIT_ITEM_ID=${folderAddEditType.toIdOrNull()}",
+            "?$EDIT_ITEM_ID=${folderAddEditType.toIdOrNull()}" +
+            "&$PARENT_FOLDER_NAME=$parentFolderName",
         navOptions = navOptions,
     )
 }
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditViewModel.kt b/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditViewModel.kt
index 06ad1ddf4a..ed925a1f3c 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditViewModel.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditViewModel.kt
@@ -39,14 +39,15 @@ class FolderAddEditViewModel @Inject constructor(
     // We load the state from the savedStateHandle for testing purposes.
     initialState = savedStateHandle[KEY_STATE]
         ?: run {
-            val folderAddEditType = FolderAddEditArgs(savedStateHandle).folderAddEditType
+            val folderAddEditArgs = FolderAddEditArgs(savedStateHandle)
             FolderAddEditState(
-                folderAddEditType = folderAddEditType,
-                viewState = when (folderAddEditType) {
+                folderAddEditType = folderAddEditArgs.folderAddEditType,
+                viewState = when (folderAddEditArgs.folderAddEditType) {
                     is FolderAddEditType.AddItem -> FolderAddEditState.ViewState.Content("")
                     is FolderAddEditType.EditItem -> FolderAddEditState.ViewState.Loading
                 },
                 dialog = null,
+                parentFolderName = folderAddEditArgs.parentFolderName?.takeUnless { it.isEmpty() },
             )
         },
 ) {
@@ -111,7 +112,13 @@ class FolderAddEditViewModel @Inject constructor(
                 FolderAddEditType.AddItem -> {
                     val result = vaultRepository.createFolder(
                         FolderView(
-                            name = content.folderName,
+                            name = state
+                                .parentFolderName
+                                ?.let {
+                                    "$it/"
+                                }
+                                .orEmpty() +
+                                content.folderName,
                             id = folderAddEditType.folderId,
                             revisionDate = DateTime.now(),
                         ),
@@ -327,6 +334,7 @@ data class FolderAddEditState(
     val folderAddEditType: FolderAddEditType,
     val viewState: ViewState,
     val dialog: DialogState?,
+    val parentFolderName: String?,
 ) : Parcelable {
 
     /**
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlocked/VaultUnlockedNavigation.kt b/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlocked/VaultUnlockedNavigation.kt
index c7097b859a..77c1f5e30b 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlocked/VaultUnlockedNavigation.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlocked/VaultUnlockedNavigation.kt
@@ -89,6 +89,12 @@ fun NavGraphBuilder.vaultUnlockedGraph(
             onNavigateToVaultEditItemScreen = {
                 navController.navigateToVaultAddEdit(VaultAddEditType.EditItem(it))
             },
+            onNavigateToAddFolderScreen = {
+                navController.navigateToFolderAddEdit(
+                    folderAddEditType = FolderAddEditType.AddItem,
+                    parentFolderName = it,
+                )
+            },
         )
         vaultUnlockedNavBarDestination(
             onNavigateToExportVault = { navController.navigateToExportVault() },
@@ -120,6 +126,12 @@ fun NavGraphBuilder.vaultUnlockedGraph(
             onNavigateToImportLogins = {
                 navController.navigateToImportLoginsScreen(snackbarRelay = it)
             },
+            onNavigateToAddFolderScreen = {
+                navController.navigateToFolderAddEdit(
+                    folderAddEditType = FolderAddEditType.AddItem,
+                    parentFolderName = it,
+                )
+            },
         )
         deleteAccountDestination(
             onNavigateBack = { navController.popBackStack() },
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlockednavbar/VaultUnlockedNavBarNavigation.kt b/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlockednavbar/VaultUnlockedNavBarNavigation.kt
index a6a43bf395..aab5900ee7 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlockednavbar/VaultUnlockedNavBarNavigation.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlockednavbar/VaultUnlockedNavBarNavigation.kt
@@ -40,6 +40,7 @@ fun NavGraphBuilder.vaultUnlockedNavBarDestination(
     onNavigateToSetupUnlockScreen: () -> Unit,
     onNavigateToSetupAutoFillScreen: () -> Unit,
     onNavigateToImportLogins: (SnackbarRelay) -> Unit,
+    onNavigateToAddFolderScreen: (selectedFolderName: String?) -> Unit,
 ) {
     composableWithStayTransitions(
         route = VAULT_UNLOCKED_NAV_BAR_ROUTE,
@@ -60,6 +61,7 @@ fun NavGraphBuilder.vaultUnlockedNavBarDestination(
             onNavigateToSetupUnlockScreen = onNavigateToSetupUnlockScreen,
             onNavigateToSetupAutoFillScreen = onNavigateToSetupAutoFillScreen,
             onNavigateToImportLogins = onNavigateToImportLogins,
+            onNavigateToAddFolderScreen = onNavigateToAddFolderScreen,
         )
     }
 }
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlockednavbar/VaultUnlockedNavBarScreen.kt b/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlockednavbar/VaultUnlockedNavBarScreen.kt
index 19bfc29d05..2ca7624919 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlockednavbar/VaultUnlockedNavBarScreen.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlockednavbar/VaultUnlockedNavBarScreen.kt
@@ -78,6 +78,7 @@ fun VaultUnlockedNavBarScreen(
     onNavigateToSetupUnlockScreen: () -> Unit,
     onNavigateToSetupAutoFillScreen: () -> Unit,
     onNavigateToImportLogins: (SnackbarRelay) -> Unit,
+    onNavigateToAddFolderScreen: (selectedFolderId: String?) -> Unit,
 ) {
     val state by viewModel.stateFlow.collectAsStateWithLifecycle()
 
@@ -144,6 +145,7 @@ fun VaultUnlockedNavBarScreen(
         onNavigateToSetupUnlockScreen = onNavigateToSetupUnlockScreen,
         onNavigateToSetupAutoFillScreen = onNavigateToSetupAutoFillScreen,
         onNavigateToImportLogins = onNavigateToImportLogins,
+        onNavigateToAddFolderScreen = onNavigateToAddFolderScreen,
     )
 }
 
@@ -174,6 +176,7 @@ private fun VaultUnlockedNavBarScaffold(
     onNavigateToSetupUnlockScreen: () -> Unit,
     onNavigateToSetupAutoFillScreen: () -> Unit,
     onNavigateToImportLogins: (SnackbarRelay) -> Unit,
+    onNavigateToAddFolderScreen: (selectedFolderId: String?) -> Unit,
 ) {
     var shouldDimNavBar by rememberSaveable { mutableStateOf(false) }
 
@@ -233,6 +236,7 @@ private fun VaultUnlockedNavBarScaffold(
                     shouldDimNavBar = shouldDim
                 },
                 onNavigateToImportLogins = onNavigateToImportLogins,
+                onNavigateToAddFolderScreen = onNavigateToAddFolderScreen,
             )
             sendGraph(
                 navController = navController,
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/vault/components/VaultItemSelectionDialog.kt b/app/src/main/java/com/x8bit/bitwarden/ui/vault/components/VaultItemSelectionDialog.kt
new file mode 100644
index 0000000000..ace700a238
--- /dev/null
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/vault/components/VaultItemSelectionDialog.kt
@@ -0,0 +1,47 @@
+package com.x8bit.bitwarden.ui.vault.components
+
+import androidx.compose.runtime.Composable
+import androidx.compose.ui.res.stringResource
+import com.x8bit.bitwarden.R
+import com.x8bit.bitwarden.ui.platform.components.dialog.BitwardenSelectionDialog
+import com.x8bit.bitwarden.ui.platform.components.dialog.row.BitwardenBasicDialogRow
+import com.x8bit.bitwarden.ui.vault.components.model.CreateVaultItemType
+import com.x8bit.bitwarden.ui.vault.model.VaultItemCipherType
+import kotlinx.collections.immutable.ImmutableList
+import kotlinx.collections.immutable.persistentListOf
+
+/**
+ * Reusable dialog for making selections between supported [VaultItemCipherType]s
+ *
+ * @param onOptionSelected Lambda to be called when an item is selected.
+ * @param onDismissRequest Lambda to call when the dialog is dismissed by user. Is automatically
+ * called when a selection is made.
+ * @param excludedOptions List of [VaultItemCipherType] to exclude from the presented list.
+ */
+@Composable
+fun VaultItemSelectionDialog(
+    onOptionSelected: (option: CreateVaultItemType) -> Unit,
+    onDismissRequest: () -> Unit,
+    // TODO: PM-TBD possibly remove SSH_KEY as default exclusion once added SSH_KEY is enabled.
+    excludedOptions: ImmutableList<CreateVaultItemType> = persistentListOf(
+        CreateVaultItemType.SSH_KEY,
+    ),
+) {
+    val supportedEntries = CreateVaultItemType
+        .entries
+        .filterNot { excludedOptions.contains(it) }
+    BitwardenSelectionDialog(
+        title = stringResource(R.string.type),
+        onDismissRequest = onDismissRequest,
+    ) {
+        supportedEntries.forEach {
+            BitwardenBasicDialogRow(
+                text = stringResource(it.selectionText),
+                onClick = {
+                    onDismissRequest()
+                    onOptionSelected(it)
+                },
+            )
+        }
+    }
+}
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/vault/components/model/CreateVaultItemType.kt b/app/src/main/java/com/x8bit/bitwarden/ui/vault/components/model/CreateVaultItemType.kt
new file mode 100644
index 0000000000..94c142f106
--- /dev/null
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/vault/components/model/CreateVaultItemType.kt
@@ -0,0 +1,41 @@
+package com.x8bit.bitwarden.ui.vault.components.model
+
+import androidx.annotation.StringRes
+import com.x8bit.bitwarden.R
+
+/**
+ * Enumerated values to represent a create vault item option.
+ */
+enum class CreateVaultItemType(
+    @StringRes val selectionText: Int,
+) {
+    /**
+     * A login cipher.
+     */
+    LOGIN(R.string.log_in_noun),
+
+    /**
+     * A card cipher.
+     */
+    CARD(R.string.type_card),
+
+    /**
+     * A identity cipher.
+     */
+    IDENTITY(R.string.type_identity),
+
+    /**
+     * A secure note cipher.
+     */
+    SECURE_NOTE(R.string.type_secure_note),
+
+    /**
+     * A SSH key cipher.
+     */
+    SSH_KEY(R.string.type_ssh_key),
+
+    /**
+     * A cipher item folder
+     */
+    FOLDER(R.string.folder),
+}
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/vault/components/util/CreateVaultItemTypeExtensions.kt b/app/src/main/java/com/x8bit/bitwarden/ui/vault/components/util/CreateVaultItemTypeExtensions.kt
new file mode 100644
index 0000000000..ca90aca03c
--- /dev/null
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/vault/components/util/CreateVaultItemTypeExtensions.kt
@@ -0,0 +1,17 @@
+package com.x8bit.bitwarden.ui.vault.components.util
+
+import com.x8bit.bitwarden.ui.vault.components.model.CreateVaultItemType
+import com.x8bit.bitwarden.ui.vault.model.VaultItemCipherType
+
+/**
+ * Extension function to map [CreateVaultItemType] to a matching [VaultItemCipherType] or
+ * `null` if there is no matching type.
+ */
+fun CreateVaultItemType.toVaultItemCipherTypeOrNull(): VaultItemCipherType? = when (this) {
+    CreateVaultItemType.LOGIN -> VaultItemCipherType.LOGIN
+    CreateVaultItemType.CARD -> VaultItemCipherType.CARD
+    CreateVaultItemType.IDENTITY -> VaultItemCipherType.IDENTITY
+    CreateVaultItemType.SECURE_NOTE -> VaultItemCipherType.SECURE_NOTE
+    CreateVaultItemType.SSH_KEY -> VaultItemCipherType.SSH_KEY
+    CreateVaultItemType.FOLDER -> null
+}
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingNavigation.kt b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingNavigation.kt
index e447270eb5..89a9b713e2 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingNavigation.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingNavigation.kt
@@ -69,6 +69,7 @@ fun NavGraphBuilder.vaultItemListingDestination(
         selectedFolderId: String?,
         selectedCollectionId: String?,
     ) -> Unit,
+    onNavigateToAddFolderScreen: (selectedFolderId: String?) -> Unit,
     onNavigateToSearchVault: (searchType: SearchType.Vault) -> Unit,
 ) {
     internalVaultItemListingDestination(
@@ -81,12 +82,14 @@ fun NavGraphBuilder.vaultItemListingDestination(
         onNavigateToVaultItemScreen = onNavigateToVaultItemScreen,
         onNavigateToVaultEditItemScreen = onNavigateToVaultEditItemScreen,
         onNavigateToSearch = { onNavigateToSearchVault(it as SearchType.Vault) },
+        onNavigateToAddFolderScreen = onNavigateToAddFolderScreen,
     )
 }
 
 /**
  * Add the [VaultItemListingScreen] to the nav graph.
  */
+@Suppress("LongParameterList")
 fun NavGraphBuilder.vaultItemListingDestinationAsRoot(
     onNavigateBack: () -> Unit,
     onNavigateToVaultItemScreen: (id: String) -> Unit,
@@ -96,6 +99,7 @@ fun NavGraphBuilder.vaultItemListingDestinationAsRoot(
         selectedFolderId: String?,
         selectedCollectionId: String?,
     ) -> Unit,
+    onNavigateToAddFolderScreen: (selectedFolderId: String?) -> Unit,
     onNavigateToSearchVault: (searchType: SearchType.Vault) -> Unit,
 ) {
     composableWithStayTransitions(
@@ -115,6 +119,7 @@ fun NavGraphBuilder.vaultItemListingDestinationAsRoot(
             onNavigateToVaultEditItemScreen = onNavigateToVaultEditItemScreen,
             onNavigateToVaultAddItemScreen = onNavigateToVaultAddItemScreen,
             onNavigateToSearch = { onNavigateToSearchVault(it as SearchType.Vault) },
+            onNavigateToAddFolder = onNavigateToAddFolderScreen,
             onNavigateToVaultItemListing = {},
             onNavigateToAddSendItem = {},
             onNavigateToEditSendItem = {},
@@ -137,6 +142,7 @@ fun NavGraphBuilder.sendItemListingDestination(
         onNavigateToAddSendItem = onNavigateToAddSendItem,
         onNavigateToEditSendItem = onNavigateToEditSendItem,
         onNavigateToVaultAddItemScreen = { _, _, _ -> },
+        onNavigateToAddFolderScreen = { _ -> },
         onNavigateToVaultItemScreen = { },
         onNavigateToVaultEditItemScreen = { },
         onNavigateToVaultItemListing = { },
@@ -159,6 +165,7 @@ private fun NavGraphBuilder.internalVaultItemListingDestination(
         selectedFolderId: String?,
         selectedCollectionId: String?,
     ) -> Unit,
+    onNavigateToAddFolderScreen: (selectedFolderId: String?) -> Unit,
     onNavigateToAddSendItem: () -> Unit,
     onNavigateToEditSendItem: (sendId: String) -> Unit,
     onNavigateToSearch: (searchType: SearchType) -> Unit,
@@ -190,6 +197,7 @@ private fun NavGraphBuilder.internalVaultItemListingDestination(
             onNavigateToEditSendItem = onNavigateToEditSendItem,
             onNavigateToVaultItemListing = onNavigateToVaultItemListing,
             onNavigateToSearch = onNavigateToSearch,
+            onNavigateToAddFolder = onNavigateToAddFolderScreen,
         )
     }
 }
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingScreen.kt b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingScreen.kt
index c81326318d..9015b09d62 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingScreen.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingScreen.kt
@@ -51,6 +51,8 @@ import com.x8bit.bitwarden.ui.platform.feature.settings.accountsecurity.PinInput
 import com.x8bit.bitwarden.ui.platform.manager.biometrics.BiometricsManager
 import com.x8bit.bitwarden.ui.platform.manager.exit.ExitManager
 import com.x8bit.bitwarden.ui.platform.manager.intent.IntentManager
+import com.x8bit.bitwarden.ui.vault.components.VaultItemSelectionDialog
+import com.x8bit.bitwarden.ui.vault.components.model.CreateVaultItemType
 import com.x8bit.bitwarden.ui.vault.feature.itemlisting.handlers.VaultItemListingHandlers
 import com.x8bit.bitwarden.ui.vault.feature.itemlisting.handlers.VaultItemListingUserVerificationHandlers
 import com.x8bit.bitwarden.ui.vault.feature.vault.util.initials
@@ -74,6 +76,7 @@ fun VaultItemListingScreen(
         selectedFolderId: String?,
         selectedCollectionId: String?,
     ) -> Unit,
+    onNavigateToAddFolder: (selectedFolderId: String?) -> Unit,
     onNavigateToAddSendItem: () -> Unit,
     onNavigateToEditSendItem: (sendId: String) -> Unit,
     onNavigateToSearch: (searchType: SearchType) -> Unit,
@@ -179,6 +182,10 @@ fun VaultItemListingScreen(
             }
 
             VaultItemListingEvent.ExitApp -> exitManager.exitApplication()
+
+            is VaultItemListingEvent.NavigateToAddFolder -> {
+                onNavigateToAddFolder(event.parentFolderName)
+            }
         }
     }
 
@@ -261,6 +268,15 @@ fun VaultItemListingScreen(
                 )
             }
         },
+        onVaultItemTypeSelected = remember(viewModel) {
+            {
+                viewModel.trySendAction(
+                    VaultItemListingsAction.ItemToAddToFolderSelected(
+                        itemType = it,
+                    ),
+                )
+            }
+        },
     )
 
     val vaultItemListingHandlers = remember(viewModel) {
@@ -289,6 +305,7 @@ private fun VaultItemListingDialogs(
     onSubmitPinSetUpFido2Verification: (pin: String, cipherId: String) -> Unit,
     onRetryPinSetUpFido2Verification: (cipherId: String) -> Unit,
     onDismissFido2Verification: () -> Unit,
+    onVaultItemTypeSelected: (CreateVaultItemType) -> Unit,
 ) {
     when (dialogState) {
         is VaultItemListingState.DialogState.Error -> BitwardenBasicDialog(
@@ -378,6 +395,13 @@ private fun VaultItemListingDialogs(
             )
         }
 
+        is VaultItemListingState.DialogState.VaultItemTypeSelection -> {
+            VaultItemSelectionDialog(
+                onDismissRequest = onDismissRequest,
+                onOptionSelected = onVaultItemTypeSelected,
+            )
+        }
+
         null -> Unit
     }
 }
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingViewModel.kt b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingViewModel.kt
index 76ebc21b49..bcc1d78d01 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingViewModel.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingViewModel.kt
@@ -63,6 +63,8 @@ import com.x8bit.bitwarden.ui.platform.components.model.IconRes
 import com.x8bit.bitwarden.ui.platform.feature.search.SearchTypeData
 import com.x8bit.bitwarden.ui.platform.feature.search.model.SearchType
 import com.x8bit.bitwarden.ui.platform.feature.search.util.filterAndOrganize
+import com.x8bit.bitwarden.ui.vault.components.model.CreateVaultItemType
+import com.x8bit.bitwarden.ui.vault.components.util.toVaultItemCipherTypeOrNull
 import com.x8bit.bitwarden.ui.vault.feature.itemlisting.model.ListingItemOverflowAction
 import com.x8bit.bitwarden.ui.vault.feature.itemlisting.util.determineListingPredicate
 import com.x8bit.bitwarden.ui.vault.feature.itemlisting.util.toItemListingType
@@ -269,6 +271,9 @@ class VaultItemListingViewModel @Inject constructor(
             }
 
             is VaultItemListingsAction.Internal -> handleInternalAction(action)
+            is VaultItemListingsAction.ItemToAddToFolderSelected -> {
+                handleItemToAddToFolderSelected(action)
+            }
         }
     }
 
@@ -529,33 +534,74 @@ class VaultItemListingViewModel @Inject constructor(
         }
     }
 
+    private fun handleItemToAddToFolderSelected(
+        action: VaultItemListingsAction.ItemToAddToFolderSelected,
+    ) {
+        (state.itemListingType as? VaultItemListingState.ItemListingType.Vault.Folder)
+            ?.let { folder ->
+                when (val vaultItemType = action.itemType) {
+                    CreateVaultItemType.LOGIN,
+                    CreateVaultItemType.CARD,
+                    CreateVaultItemType.IDENTITY,
+                    CreateVaultItemType.SECURE_NOTE,
+                    CreateVaultItemType.SSH_KEY,
+                        -> {
+                        vaultItemType
+                            .toVaultItemCipherTypeOrNull()
+                            ?.let {
+                                sendEvent(
+                                    VaultItemListingEvent.NavigateToAddVaultItem(
+                                        vaultItemCipherType = it,
+                                        selectedFolderId = folder.folderId,
+                                    ),
+                                )
+                            }
+                    }
+
+                    CreateVaultItemType.FOLDER -> {
+                        sendEvent(
+                            VaultItemListingEvent.NavigateToAddFolder(
+                                parentFolderName = folder.fullyQualifiedName,
+                            ),
+                        )
+                    }
+                }
+            }
+    }
+
     private fun handleAddVaultItemClick() {
-        val event = when (val itemListingType = state.itemListingType) {
+        when (val itemListingType = state.itemListingType) {
             is VaultItemListingState.ItemListingType.Vault.Folder -> {
-                VaultItemListingEvent.NavigateToAddVaultItem(
-                    vaultItemCipherType = itemListingType.toVaultItemCipherType(),
-                    selectedFolderId = itemListingType.folderId,
-                )
+                mutableStateFlow.update {
+                    it.copy(
+                        dialogState = VaultItemListingState.DialogState.VaultItemTypeSelection,
+                    )
+                }
             }
 
             is VaultItemListingState.ItemListingType.Vault.Collection -> {
-                VaultItemListingEvent.NavigateToAddVaultItem(
-                    vaultItemCipherType = itemListingType.toVaultItemCipherType(),
-                    selectedCollectionId = itemListingType.collectionId,
+                sendEvent(
+                    VaultItemListingEvent.NavigateToAddVaultItem(
+                        vaultItemCipherType = itemListingType.toVaultItemCipherType(),
+                        selectedCollectionId = itemListingType.collectionId,
+                    ),
                 )
             }
 
             is VaultItemListingState.ItemListingType.Vault -> {
-                VaultItemListingEvent.NavigateToAddVaultItem(
-                    vaultItemCipherType = itemListingType.toVaultItemCipherType(),
+                sendEvent(
+                    VaultItemListingEvent.NavigateToAddVaultItem(
+                        vaultItemCipherType = itemListingType.toVaultItemCipherType(),
+                    ),
                 )
             }
 
             is VaultItemListingState.ItemListingType.Send -> {
-                VaultItemListingEvent.NavigateToAddSendItem
+                sendEvent(
+                    VaultItemListingEvent.NavigateToAddSendItem,
+                )
             }
         }
-        sendEvent(event)
     }
 
     private fun handleEditSendClick(action: ListingItemOverflowAction.SendAction.EditClick) {
@@ -1925,6 +1971,12 @@ data class VaultItemListingState(
             val message: Text,
             val selectedCipherId: String,
         ) : DialogState()
+
+        /**
+         * Represents a selection dialog to choose a vault item type to add to folder.
+         */
+        @Parcelize
+        data object VaultItemTypeSelection : DialogState()
     }
 
     /**
@@ -2129,6 +2181,7 @@ data class VaultItemListingState(
                 val folderId: String?,
                 // The folderName will always initially be an empty string
                 val folderName: String = "",
+                val fullyQualifiedName: String = "",
             ) : Vault() {
                 override val titleText: Text
                     get() = folderId
@@ -2199,6 +2252,13 @@ sealed class VaultItemListingEvent {
         val selectedCollectionId: String? = null,
     ) : VaultItemListingEvent()
 
+    /**
+     * Navigates to add the folder item.
+     */
+    data class NavigateToAddFolder(
+        val parentFolderName: String,
+    ) : VaultItemListingEvent()
+
     /**
      * Navigates to the collection.
      */
@@ -2494,6 +2554,13 @@ sealed class VaultItemListingsAction {
         val cipherViewId: String,
     ) : VaultItemListingsAction()
 
+    /**
+     * Indicated a selection was made to add a new item to the vault.
+     */
+    data class ItemToAddToFolderSelected(
+        val itemType: CreateVaultItemType,
+    ) : VaultItemListingsAction()
+
     /**
      * Models actions that the [VaultItemListingViewModel] itself might send.
      */
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/util/VaultItemListingDataExtensions.kt b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/util/VaultItemListingDataExtensions.kt
index dc8fa52b20..536d20603b 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/util/VaultItemListingDataExtensions.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/util/VaultItemListingDataExtensions.kt
@@ -214,7 +214,6 @@ fun VaultData.toViewState(
                     .asText()
             }
         val shouldShowAddButton = when (itemListingType) {
-            is VaultItemListingState.ItemListingType.Vault.Folder,
             VaultItemListingState.ItemListingType.Vault.Trash,
             VaultItemListingState.ItemListingType.Vault.SshKey,
                 -> false
@@ -306,13 +305,17 @@ fun VaultItemListingState.ItemListingType.updateWithAdditionalDataIfNecessary(
                 .orEmpty(),
         )
 
-        is VaultItemListingState.ItemListingType.Vault.Folder -> copy(
-            folderName = folderList
+        is VaultItemListingState.ItemListingType.Vault.Folder -> {
+            val fullyQualifiedName = folderList
                 .find { it.id == folderId }
                 ?.name
-                ?.toFolderDisplayName(folderList)
-                .orEmpty(),
-        )
+            copy(
+                folderName = fullyQualifiedName
+                    ?.toFolderDisplayName()
+                    .orEmpty(),
+                fullyQualifiedName = fullyQualifiedName.orEmpty(),
+            )
+        }
 
         is VaultItemListingState.ItemListingType.Vault.Identity -> this
         is VaultItemListingState.ItemListingType.Vault.Login -> this
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/util/FolderViewExtensions.kt b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/util/FolderViewExtensions.kt
index d3f1200c5e..0806aa6ef4 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/util/FolderViewExtensions.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/util/FolderViewExtensions.kt
@@ -68,18 +68,4 @@ fun List<FolderView>.getFilteredFolders(folderName: String? = null): List<Folder
  * folder name we receive is often nested, and we want to extract just the relevant name for
  * display to the user.
  */
-fun String.toFolderDisplayName(list: List<FolderView>): String {
-    var folderName = this
-
-    // cycle through the list and determine the correct display name of the folder.
-    list.forEach { folderView ->
-        if (this.startsWith(folderView.name + FOLDER_DIVIDER)) {
-            val newName = this.substringAfter(folderView.name + FOLDER_DIVIDER)
-            if (newName.isNotBlank() && newName.length < folderName.length) {
-                folderName = newName
-            }
-        }
-    }
-
-    return folderName
-}
+fun String.toFolderDisplayName(): String = this.split(FOLDER_DIVIDER).last()
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultGraphNavigation.kt b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultGraphNavigation.kt
index 40069a2f36..57cf12cf29 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultGraphNavigation.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultGraphNavigation.kt
@@ -30,6 +30,7 @@ fun NavGraphBuilder.vaultGraph(
     onNavigateToSearchVault: (searchType: SearchType.Vault) -> Unit,
     onDimBottomNavBarRequest: (shouldDim: Boolean) -> Unit,
     onNavigateToImportLogins: (SnackbarRelay) -> Unit,
+    onNavigateToAddFolderScreen: (selectedFolderId: String?) -> Unit,
 ) {
     navigation(
         route = VAULT_GRAPH_ROUTE,
@@ -37,7 +38,7 @@ fun NavGraphBuilder.vaultGraph(
     ) {
         vaultDestination(
             onNavigateToVaultAddItemScreen = {
-                onNavigateToVaultAddItemScreen(VaultItemCipherType.LOGIN, null, null)
+                onNavigateToVaultAddItemScreen(it, null, null)
             },
             onNavigateToVaultItemScreen = onNavigateToVaultItemScreen,
             onNavigateToVaultEditItemScreen = onNavigateToVaultEditItemScreen,
@@ -48,6 +49,7 @@ fun NavGraphBuilder.vaultGraph(
             onNavigateToSearchVault = onNavigateToSearchVault,
             onDimBottomNavBarRequest = onDimBottomNavBarRequest,
             onNavigateToImportLogins = onNavigateToImportLogins,
+            onNavigateToAddFolderScreen = onNavigateToAddFolderScreen,
         )
         vaultItemListingDestination(
             onNavigateBack = { navController.popBackStack() },
@@ -58,6 +60,7 @@ fun NavGraphBuilder.vaultGraph(
             onNavigateToVaultItemListing = {
                 navController.navigateToVaultItemListing(it)
             },
+            onNavigateToAddFolderScreen = onNavigateToAddFolderScreen,
         )
 
         vaultVerificationCodeDestination(
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultNavigation.kt b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultNavigation.kt
index 3f87d6f855..d6811e269f 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultNavigation.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultNavigation.kt
@@ -6,6 +6,7 @@ import androidx.navigation.NavOptions
 import com.x8bit.bitwarden.ui.platform.base.util.composableWithRootPushTransitions
 import com.x8bit.bitwarden.ui.platform.feature.search.model.SearchType
 import com.x8bit.bitwarden.ui.platform.manager.snackbar.SnackbarRelay
+import com.x8bit.bitwarden.ui.vault.model.VaultItemCipherType
 import com.x8bit.bitwarden.ui.vault.model.VaultItemListingType
 
 const val VAULT_ROUTE: String = "vault"
@@ -15,7 +16,7 @@ const val VAULT_ROUTE: String = "vault"
  */
 @Suppress("LongParameterList")
 fun NavGraphBuilder.vaultDestination(
-    onNavigateToVaultAddItemScreen: () -> Unit,
+    onNavigateToVaultAddItemScreen: (VaultItemCipherType) -> Unit,
     onNavigateToVerificationCodeScreen: () -> Unit,
     onNavigateToVaultItemScreen: (vaultItemId: String) -> Unit,
     onNavigateToVaultEditItemScreen: (vaultItemId: String) -> Unit,
@@ -23,6 +24,7 @@ fun NavGraphBuilder.vaultDestination(
     onNavigateToSearchVault: (searchType: SearchType.Vault) -> Unit,
     onDimBottomNavBarRequest: (shouldDim: Boolean) -> Unit,
     onNavigateToImportLogins: (SnackbarRelay) -> Unit,
+    onNavigateToAddFolderScreen: (selectedFolderId: String?) -> Unit,
 ) {
     composableWithRootPushTransitions(
         route = VAULT_ROUTE,
@@ -36,6 +38,7 @@ fun NavGraphBuilder.vaultDestination(
             onNavigateToSearchVault = onNavigateToSearchVault,
             onDimBottomNavBarRequest = onDimBottomNavBarRequest,
             onNavigateToImportLogins = onNavigateToImportLogins,
+            onNavigateToAddFolderScreen = onNavigateToAddFolderScreen,
         )
     }
 }
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultScreen.kt b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultScreen.kt
index 0e727efc5b..d9078fbbcd 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultScreen.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultScreen.kt
@@ -63,8 +63,11 @@ import com.x8bit.bitwarden.ui.platform.manager.exit.ExitManager
 import com.x8bit.bitwarden.ui.platform.manager.intent.IntentManager
 import com.x8bit.bitwarden.ui.platform.manager.review.AppReviewManager
 import com.x8bit.bitwarden.ui.platform.manager.snackbar.SnackbarRelay
+import com.x8bit.bitwarden.ui.vault.components.VaultItemSelectionDialog
+import com.x8bit.bitwarden.ui.vault.components.model.CreateVaultItemType
 import com.x8bit.bitwarden.ui.vault.feature.itemlisting.model.ListingItemOverflowAction
 import com.x8bit.bitwarden.ui.vault.feature.vault.handlers.VaultHandlers
+import com.x8bit.bitwarden.ui.vault.model.VaultItemCipherType
 import com.x8bit.bitwarden.ui.vault.model.VaultItemListingType
 import kotlinx.collections.immutable.persistentListOf
 import kotlinx.collections.immutable.toImmutableList
@@ -80,7 +83,9 @@ private const val APP_REVIEW_DELAY = 3000L
 @Composable
 fun VaultScreen(
     viewModel: VaultViewModel = hiltViewModel(),
-    onNavigateToVaultAddItemScreen: () -> Unit,
+    onNavigateToVaultAddItemScreen: (
+        vaultItemCipherType: VaultItemCipherType,
+    ) -> Unit,
     onNavigateToVaultItemScreen: (vaultItemId: String) -> Unit,
     onNavigateToVaultEditItemScreen: (vaultItemId: String) -> Unit,
     onNavigateToVerificationCodeScreen: () -> Unit,
@@ -88,6 +93,7 @@ fun VaultScreen(
     onNavigateToSearchVault: (searchType: SearchType.Vault) -> Unit,
     onDimBottomNavBarRequest: (shouldDim: Boolean) -> Unit,
     onNavigateToImportLogins: (SnackbarRelay) -> Unit,
+    onNavigateToAddFolderScreen: (selectedFolderId: String?) -> Unit,
     exitManager: ExitManager = LocalExitManager.current,
     intentManager: IntentManager = LocalIntentManager.current,
     appReviewManager: AppReviewManager = LocalAppReviewManager.current,
@@ -122,7 +128,9 @@ fun VaultScreen(
     }
     EventsEffect(viewModel = viewModel) { event ->
         when (event) {
-            VaultEvent.NavigateToAddItemScreen -> onNavigateToVaultAddItemScreen()
+            is VaultEvent.NavigateToAddItemScreen -> {
+                onNavigateToVaultAddItemScreen(event.type)
+            }
 
             VaultEvent.NavigateToVaultSearchScreen -> onNavigateToSearchVault(SearchType.Vault.All)
 
@@ -155,6 +163,10 @@ fun VaultScreen(
             VaultEvent.PromptForAppReview -> {
                 launchPrompt.invoke()
             }
+
+            VaultEvent.NavigateToAddFolder -> {
+                onNavigateToAddFolderScreen(null)
+            }
         }
     }
     val vaultHandlers = remember(viewModel) { VaultHandlers.create(viewModel) }
@@ -297,7 +309,7 @@ private fun VaultScreenScaffold(
                 exit = scaleOut(),
             ) {
                 BitwardenFloatingActionButton(
-                    onClick = vaultHandlers.addItemClickAction,
+                    onClick = vaultHandlers.selectAddItemTypeClickAction,
                     painter = rememberVectorPainter(id = R.drawable.ic_plus_large),
                     contentDescription = stringResource(id = R.string.add_item),
                     modifier = Modifier.testTag(tag = "AddItemButton"),
@@ -364,7 +376,9 @@ private fun VaultScreenScaffold(
                         ),
                         buttonText = stringResource(R.string.new_login),
                         policyDisablesSend = false,
-                        addItemClickAction = vaultHandlers.addItemClickAction,
+                        addItemClickAction = {
+                            vaultHandlers.addItemClickAction(CreateVaultItemType.LOGIN)
+                        },
                         modifier = Modifier.fillMaxSize(),
                     )
                 }
@@ -395,6 +409,13 @@ private fun VaultDialogs(
             onDismissRequest = vaultHandlers.dialogDismiss,
         )
 
+        VaultState.DialogState.SelectVaultAddItemType -> VaultItemSelectionDialog(
+            onOptionSelected = {
+                vaultHandlers.addItemClickAction(it)
+            },
+            onDismissRequest = vaultHandlers.dialogDismiss,
+        )
+
         null -> Unit
     }
 }
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultViewModel.kt b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultViewModel.kt
index d978e7ff56..70f6145838 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultViewModel.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultViewModel.kt
@@ -37,6 +37,8 @@ import com.x8bit.bitwarden.ui.platform.components.model.IconRes
 import com.x8bit.bitwarden.ui.platform.components.snackbar.BitwardenSnackbarData
 import com.x8bit.bitwarden.ui.platform.manager.snackbar.SnackbarRelay
 import com.x8bit.bitwarden.ui.platform.manager.snackbar.SnackbarRelayManager
+import com.x8bit.bitwarden.ui.vault.components.model.CreateVaultItemType
+import com.x8bit.bitwarden.ui.vault.components.util.toVaultItemCipherTypeOrNull
 import com.x8bit.bitwarden.ui.vault.feature.itemlisting.model.ListingItemOverflowAction
 import com.x8bit.bitwarden.ui.vault.feature.vault.model.VaultFilterData
 import com.x8bit.bitwarden.ui.vault.feature.vault.model.VaultFilterType
@@ -48,6 +50,7 @@ import com.x8bit.bitwarden.ui.vault.feature.vault.util.toVaultFilterData
 import com.x8bit.bitwarden.ui.vault.feature.vault.util.toViewState
 import com.x8bit.bitwarden.ui.vault.feature.vault.util.vaultFilterDataIfRequired
 import com.x8bit.bitwarden.ui.vault.model.VaultCardBrand
+import com.x8bit.bitwarden.ui.vault.model.VaultItemCipherType
 import com.x8bit.bitwarden.ui.vault.model.VaultItemListingType
 import com.x8bit.bitwarden.ui.vault.util.shortName
 import dagger.hilt.android.lifecycle.HiltViewModel
@@ -65,7 +68,7 @@ import javax.inject.Inject
 /**
  * Manages [VaultState], handles [VaultAction], and launches [VaultEvent] for the [VaultScreen].
  */
-@Suppress("TooManyFunctions", "LongParameterList")
+@Suppress("TooManyFunctions", "LongParameterList", "LargeClass")
 @HiltViewModel
 class VaultViewModel @Inject constructor(
     private val authRepository: AuthRepository,
@@ -170,7 +173,7 @@ class VaultViewModel @Inject constructor(
 
     override fun handleAction(action: VaultAction) {
         when (action) {
-            is VaultAction.AddItemClick -> handleAddItemClick()
+            is VaultAction.AddItemClick -> handleAddItemClick(action)
             is VaultAction.CardGroupClick -> handleCardClick()
             is VaultAction.FolderClick -> handleFolderItemClick(action)
             is VaultAction.CollectionClick -> handleCollectionItemClick(action)
@@ -203,6 +206,16 @@ class VaultViewModel @Inject constructor(
             VaultAction.DismissImportActionCard -> handleDismissImportActionCard()
             VaultAction.ImportActionCardClick -> handleImportActionCardClick()
             VaultAction.LifecycleResumed -> handleLifecycleResumed()
+            VaultAction.SelectAddItemType -> handleSelectAddItemType()
+        }
+    }
+
+    //region VaultAction Handlers
+    private fun handleSelectAddItemType() {
+        mutableStateFlow.update {
+            it.copy(
+                dialog = VaultState.DialogState.SelectVaultAddItemType,
+            )
         }
     }
 
@@ -253,9 +266,31 @@ class VaultViewModel @Inject constructor(
         )
     }
 
-    //region VaultAction Handlers
-    private fun handleAddItemClick() {
-        sendEvent(VaultEvent.NavigateToAddItemScreen)
+    private fun handleAddItemClick(action: VaultAction.AddItemClick) {
+        when (val vaultItemType = action.type) {
+            CreateVaultItemType.LOGIN,
+            CreateVaultItemType.CARD,
+            CreateVaultItemType.IDENTITY,
+            CreateVaultItemType.SECURE_NOTE,
+            CreateVaultItemType.SSH_KEY,
+                -> {
+                vaultItemType
+                    .toVaultItemCipherTypeOrNull()
+                    ?.let {
+                        sendEvent(
+                            VaultEvent.NavigateToAddItemScreen(
+                                type = it,
+                            ),
+                        )
+                    }
+            }
+
+            CreateVaultItemType.FOLDER -> {
+                sendEvent(
+                    VaultEvent.NavigateToAddFolder,
+                )
+            }
+        }
     }
 
     private fun handleCardClick() {
@@ -1074,6 +1109,12 @@ data class VaultState(
         @Parcelize
         data object Syncing : DialogState()
 
+        /**
+         * Represents a dialog for selecting a vault item type to add.
+         */
+        @Parcelize
+        data object SelectVaultAddItemType : DialogState()
+
         /**
          * Represents an error dialog with the given [title] and [message].
          */
@@ -1097,7 +1138,9 @@ sealed class VaultEvent {
     /**
      * Navigate to the Add Item screen.
      */
-    data object NavigateToAddItemScreen : VaultEvent()
+    data class NavigateToAddItemScreen(
+        val type: VaultItemCipherType,
+    ) : VaultEvent()
 
     /**
      * Navigate to the item details screen.
@@ -1156,6 +1199,11 @@ sealed class VaultEvent {
      * Show a snackbar with the given [data].
      */
     data class ShowSnackbar(val data: BitwardenSnackbarData) : VaultEvent(), BackgroundEvent
+
+    /**
+     * Navigate to the add folder screen
+     */
+    data object NavigateToAddFolder : VaultEvent()
 }
 
 /**
@@ -1171,7 +1219,7 @@ sealed class VaultAction {
      * Click the add an item button.
      * This can either be the floating action button or actual add an item button.
      */
-    data object AddItemClick : VaultAction()
+    data class AddItemClick(val type: CreateVaultItemType) : VaultAction()
 
     /**
      * Click the search icon.
@@ -1326,6 +1374,11 @@ sealed class VaultAction {
      */
     data object LifecycleResumed : VaultAction()
 
+    /**
+     * User has clicked button to bring up the add item selection dialog.
+     */
+    data object SelectAddItemType : VaultAction()
+
     /**
      * Models actions that the [VaultViewModel] itself might send.
      */
diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/handlers/VaultHandlers.kt b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/handlers/VaultHandlers.kt
index 0c257640c2..c3fa2e4578 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/handlers/VaultHandlers.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/vault/feature/vault/handlers/VaultHandlers.kt
@@ -1,6 +1,7 @@
 package com.x8bit.bitwarden.ui.vault.feature.vault.handlers
 
 import com.x8bit.bitwarden.ui.platform.components.model.AccountSummary
+import com.x8bit.bitwarden.ui.vault.components.model.CreateVaultItemType
 import com.x8bit.bitwarden.ui.vault.feature.itemlisting.model.ListingItemOverflowAction
 import com.x8bit.bitwarden.ui.vault.feature.vault.VaultAction
 import com.x8bit.bitwarden.ui.vault.feature.vault.VaultState
@@ -12,7 +13,8 @@ import com.x8bit.bitwarden.ui.vault.feature.vault.model.VaultFilterType
  */
 data class VaultHandlers(
     val vaultFilterTypeSelect: (VaultFilterType) -> Unit,
-    val addItemClickAction: () -> Unit,
+    val selectAddItemTypeClickAction: () -> Unit,
+    val addItemClickAction: (CreateVaultItemType) -> Unit,
     val searchIconClickAction: () -> Unit,
     val accountLockClickAction: (AccountSummary) -> Unit,
     val accountLogoutClickAction: (AccountSummary) -> Unit,
@@ -49,7 +51,10 @@ data class VaultHandlers(
                 vaultFilterTypeSelect = {
                     viewModel.trySendAction(VaultAction.VaultFilterTypeSelect(it))
                 },
-                addItemClickAction = { viewModel.trySendAction(VaultAction.AddItemClick) },
+                selectAddItemTypeClickAction = {
+                    viewModel.trySendAction(VaultAction.SelectAddItemType)
+                },
+                addItemClickAction = { viewModel.trySendAction(VaultAction.AddItemClick(it)) },
                 searchIconClickAction = { viewModel.trySendAction(VaultAction.SearchIconClick) },
                 accountLockClickAction = {
                     viewModel.trySendAction(VaultAction.LockAccountClick(it))
diff --git a/app/src/test/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditScreenTest.kt b/app/src/test/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditScreenTest.kt
index f63c2dc69f..1c49f51593 100644
--- a/app/src/test/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditScreenTest.kt
+++ b/app/src/test/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditScreenTest.kt
@@ -246,9 +246,11 @@ private val DEFAULT_STATE_ADD = FolderAddEditState(
     folderAddEditType = FolderAddEditType.AddItem,
     viewState = FolderAddEditState.ViewState.Loading,
     dialog = null,
+    parentFolderName = null,
 )
 private val DEFAULT_STATE_EDIT = FolderAddEditState(
     folderAddEditType = FolderAddEditType.EditItem("1"),
     viewState = FolderAddEditState.ViewState.Loading,
     dialog = null,
+    parentFolderName = null,
 )
diff --git a/app/src/test/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditViewModelTest.kt b/app/src/test/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditViewModelTest.kt
index cb515a1bf2..fbf6353055 100644
--- a/app/src/test/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditViewModelTest.kt
+++ b/app/src/test/java/com/x8bit/bitwarden/ui/platform/feature/settings/folders/addedit/FolderAddEditViewModelTest.kt
@@ -18,12 +18,16 @@ import io.mockk.coEvery
 import io.mockk.coVerify
 import io.mockk.every
 import io.mockk.mockk
+import io.mockk.mockkStatic
+import io.mockk.unmockkStatic
 import io.mockk.verify
 import kotlinx.coroutines.flow.MutableStateFlow
 import kotlinx.coroutines.test.runTest
 import org.junit.jupiter.api.Assertions.assertEquals
 import org.junit.jupiter.api.Test
+import java.time.Instant
 
+@Suppress("LargeClass")
 class FolderAddEditViewModelTest : BaseViewModelTest() {
 
     private val mutableFoldersStateFlow =
@@ -132,6 +136,7 @@ class FolderAddEditViewModelTest : BaseViewModelTest() {
                 viewState = FolderAddEditState.ViewState.Content(
                     folderName = DEFAULT_FOLDER_NAME,
                 ),
+                parentFolderName = null,
             )
 
             val stateWithoutDialog = stateWithDialog.copy(
@@ -175,6 +180,7 @@ class FolderAddEditViewModelTest : BaseViewModelTest() {
                 viewState = FolderAddEditState.ViewState.Error(
                     R.string.generic_error_message.asText(),
                 ),
+                parentFolderName = null,
             )
 
             val viewModel = createViewModel(
@@ -201,6 +207,7 @@ class FolderAddEditViewModelTest : BaseViewModelTest() {
                 viewState = FolderAddEditState.ViewState.Content(
                     folderName = DEFAULT_FOLDER_NAME,
                 ),
+                parentFolderName = null,
             )
 
             val stateWithoutDialog = stateWithDialog.copy(
@@ -243,6 +250,7 @@ class FolderAddEditViewModelTest : BaseViewModelTest() {
                 viewState = FolderAddEditState.ViewState.Content(
                     folderName = "",
                 ),
+                parentFolderName = null,
             )
 
             val stateWithDialog = stateWithoutName.copy(
@@ -277,6 +285,7 @@ class FolderAddEditViewModelTest : BaseViewModelTest() {
                 viewState = FolderAddEditState.ViewState.Content(
                     folderName = DEFAULT_FOLDER_NAME,
                 ),
+                parentFolderName = null,
             )
 
             val stateWithoutDialog = stateWithDialog.copy(
@@ -301,6 +310,83 @@ class FolderAddEditViewModelTest : BaseViewModelTest() {
             }
         }
 
+    @Suppress("MaxLineLength")
+    @Test
+    fun `in add mode, SaveClick createFolder with no parentFolderNamePresent should just create folder with entered name`() =
+        runTest {
+            mockkStatic(DateTime::class)
+            every { DateTime.now() } returns Instant.MIN
+            val viewModel =
+                createViewModel(
+                    createSavedStateHandleWithState(
+                        FolderAddEditState(
+                            folderAddEditType = FolderAddEditType.AddItem,
+                            viewState = FolderAddEditState.ViewState.Content(
+                                folderName = DEFAULT_FOLDER_NAME,
+                            ),
+                            dialog = null,
+                            parentFolderName = null,
+                        ),
+                    ),
+                )
+
+            coEvery {
+                vaultRepository.createFolder(any())
+            } returns CreateFolderResult.Success(mockk())
+            viewModel.trySendAction(FolderAddEditAction.SaveClick)
+            coVerify(
+                exactly = 1,
+            ) {
+                vaultRepository.createFolder(
+                    folderView = FolderView(
+                        name = DEFAULT_FOLDER_NAME,
+                        id = null,
+                        revisionDate = Instant.MIN,
+                    ),
+                )
+            }
+            unmockkStatic(DateTime::class)
+        }
+
+    @Suppress("MaxLineLength")
+    @Test
+    fun `in add mode, SaveClick createFolder with a parentFolderNamePresent should prepend the parent folder to the entered name`() =
+        runTest {
+            mockkStatic(DateTime::class)
+            every { DateTime.now() } returns Instant.MIN
+            val parentFolderName = "parent/folder"
+            val viewModel =
+                createViewModel(
+                    createSavedStateHandleWithState(
+                        FolderAddEditState(
+                            folderAddEditType = FolderAddEditType.AddItem,
+                            viewState = FolderAddEditState.ViewState.Content(
+                                folderName = DEFAULT_FOLDER_NAME,
+                            ),
+                            dialog = null,
+                            parentFolderName = parentFolderName,
+                        ),
+                    ),
+                )
+
+            coEvery {
+                vaultRepository.createFolder(any())
+            } returns CreateFolderResult.Success(mockk())
+            viewModel.trySendAction(FolderAddEditAction.SaveClick)
+            coVerify(
+                exactly = 1,
+            ) {
+                vaultRepository.createFolder(
+                    folderView = FolderView(
+                        name = "$parentFolderName/$DEFAULT_FOLDER_NAME",
+                        id = null,
+                        revisionDate = Instant.MIN,
+                    ),
+                )
+            }
+            unmockkStatic(DateTime::class)
+        }
+
     @Test
     fun `in add mode, SaveClick createFolder error should show an error dialog`() = runTest {
         val state = FolderAddEditState(
@@ -309,6 +395,7 @@ class FolderAddEditViewModelTest : BaseViewModelTest() {
             viewState = FolderAddEditState.ViewState.Content(
                 folderName = DEFAULT_FOLDER_NAME,
             ),
+            parentFolderName = null,
         )
 
         val viewModel = createViewModel(
@@ -344,6 +431,7 @@ class FolderAddEditViewModelTest : BaseViewModelTest() {
                 viewState = FolderAddEditState.ViewState.Content(
                     folderName = DEFAULT_FOLDER_NAME,
                 ),
+                parentFolderName = null,
             )
 
             val stateWithoutDialog = stateWithDialog.copy(
@@ -389,6 +477,7 @@ class FolderAddEditViewModelTest : BaseViewModelTest() {
             viewState = FolderAddEditState.ViewState.Content(
                 folderName = DEFAULT_FOLDER_NAME,
             ),
+            parentFolderName = null,
         )
 
         val viewModel = createViewModel(
@@ -664,6 +753,7 @@ private val DEFAULT_STATE = FolderAddEditState(
     viewState = FolderAddEditState.ViewState.Loading,
     dialog = FolderAddEditState.DialogState.Loading("Loading".asText()),
     folderAddEditType = FolderAddEditType.AddItem,
+    parentFolderName = null,
 )
 
 private const val DEFAULT_EDIT_ITEM_ID = "edit_id"
diff --git a/app/src/test/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlockednavbar/VaultUnlockedNavBarScreenTest.kt b/app/src/test/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlockednavbar/VaultUnlockedNavBarScreenTest.kt
index ca324e073f..d0eac04636 100644
--- a/app/src/test/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlockednavbar/VaultUnlockedNavBarScreenTest.kt
+++ b/app/src/test/java/com/x8bit/bitwarden/ui/platform/feature/vaultunlockednavbar/VaultUnlockedNavBarScreenTest.kt
@@ -56,6 +56,7 @@ class VaultUnlockedNavBarScreenTest : BaseComposeTest() {
                     onNavigateToSetupAutoFillScreen = {},
                     onNavigateToSetupUnlockScreen = {},
                     onNavigateToImportLogins = {},
+                    onNavigateToAddFolderScreen = { _ -> },
                 )
             }
         }
diff --git a/app/src/test/java/com/x8bit/bitwarden/ui/vault/components/util/CreateVaultItemTypeExtensionsTest.kt b/app/src/test/java/com/x8bit/bitwarden/ui/vault/components/util/CreateVaultItemTypeExtensionsTest.kt
new file mode 100644
index 0000000000..0bb6b1bebe
--- /dev/null
+++ b/app/src/test/java/com/x8bit/bitwarden/ui/vault/components/util/CreateVaultItemTypeExtensionsTest.kt
@@ -0,0 +1,45 @@
+package com.x8bit.bitwarden.ui.vault.components.util
+
+import com.x8bit.bitwarden.ui.vault.components.model.CreateVaultItemType
+import com.x8bit.bitwarden.ui.vault.model.VaultItemCipherType
+import org.junit.jupiter.api.Assertions.assertEquals
+import org.junit.jupiter.api.Assertions.assertNull
+import org.junit.jupiter.api.Test
+
+class CreateVaultItemTypeExtensionsTest {
+
+    @Test
+    fun `Add CreateVaultItemType values should map to correct VaultItemCipherType or null`() {
+        CreateVaultItemType.entries.forEach { createVaultItemType ->
+            val actualResult = createVaultItemType.toVaultItemCipherTypeOrNull()
+            when (createVaultItemType) {
+                CreateVaultItemType.LOGIN -> assertEquals(
+                    VaultItemCipherType.LOGIN,
+                    actualResult,
+                )
+
+                CreateVaultItemType.CARD -> assertEquals(
+                    VaultItemCipherType.CARD,
+                    actualResult,
+                )
+
+                CreateVaultItemType.IDENTITY -> assertEquals(
+                    VaultItemCipherType.IDENTITY,
+                    actualResult,
+                )
+
+                CreateVaultItemType.SECURE_NOTE -> assertEquals(
+                    VaultItemCipherType.SECURE_NOTE,
+                    actualResult,
+                )
+
+                CreateVaultItemType.SSH_KEY -> assertEquals(
+                    VaultItemCipherType.SSH_KEY,
+                    actualResult,
+                )
+
+                CreateVaultItemType.FOLDER -> assertNull(actualResult)
+            }
+        }
+    }
+}
diff --git a/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/addedit/VaultAddEditViewModelTest.kt b/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/addedit/VaultAddEditViewModelTest.kt
index fb18ce3b42..1d43c64c34 100644
--- a/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/addedit/VaultAddEditViewModelTest.kt
+++ b/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/addedit/VaultAddEditViewModelTest.kt
@@ -4471,7 +4471,7 @@ class VaultAddEditViewModelTest : BaseViewModelTest() {
                 VaultItemCipherType.IDENTITY -> "identity"
                 VaultItemCipherType.SECURE_NOTE -> "secure_note"
                 VaultItemCipherType.SSH_KEY -> "ssh_key"
-                null -> null
+                else -> null
             },
         )
     }
diff --git a/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingScreenTest.kt b/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingScreenTest.kt
index 10150e0d09..765cacb35c 100644
--- a/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingScreenTest.kt
+++ b/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingScreenTest.kt
@@ -53,6 +53,7 @@ import com.x8bit.bitwarden.ui.util.performLockAccountClick
 import com.x8bit.bitwarden.ui.util.performLogoutAccountClick
 import com.x8bit.bitwarden.ui.util.performRemoveAccountClick
 import com.x8bit.bitwarden.ui.util.performYesDialogButtonClick
+import com.x8bit.bitwarden.ui.vault.components.model.CreateVaultItemType
 import com.x8bit.bitwarden.ui.vault.feature.itemlisting.model.ListingItemOverflowAction
 import com.x8bit.bitwarden.ui.vault.feature.vault.model.VaultFilterType
 import com.x8bit.bitwarden.ui.vault.model.VaultItemCipherType
@@ -84,6 +85,8 @@ class VaultItemListingScreenTest : BaseComposeTest() {
     private var onNavigateToVaultEditItemScreenId: String? = null
     private var onNavigateToSearchType: SearchType? = null
     private var onNavigateToVaultItemListingScreenType: VaultItemListingType? = null
+    private var onNavigateToAddFolderCalled = false
+    private var onNavigateToAddFolderParentFolderName: String? = null
 
     private val exitManager: ExitManager = mockk {
         every { exitApplication() } just runs
@@ -126,6 +129,10 @@ class VaultItemListingScreenTest : BaseComposeTest() {
                 onNavigateToSearch = { onNavigateToSearchType = it },
                 onNavigateToVaultEditItemScreen = { onNavigateToVaultEditItemScreenId = it },
                 onNavigateToVaultItemListing = { this.onNavigateToVaultItemListingScreenType = it },
+                onNavigateToAddFolder = { folderName ->
+                    onNavigateToAddFolderCalled = true
+                    onNavigateToAddFolderParentFolderName = folderName
+                },
             )
         }
     }
@@ -2109,6 +2116,60 @@ class VaultItemListingScreenTest : BaseComposeTest() {
             )
         }
     }
+
+    @Test
+    fun `NavigateToAddFolder event calls onNavigateToAddFolder callback with parent name`() {
+        val parentFolder = "momNpop"
+        mutableEventFlow.tryEmit(
+            VaultItemListingEvent.NavigateToAddFolder(parentFolderName = parentFolder),
+        )
+        assertTrue(onNavigateToAddFolderCalled)
+        assertEquals(
+            parentFolder,
+            onNavigateToAddFolderParentFolderName,
+        )
+    }
+
+    @Test
+    fun `VaultItemTypeSelection dialog state show vault item type selection dialog`() {
+        mutableStateFlow.update {
+            it.copy(dialogState = VaultItemListingState.DialogState.VaultItemTypeSelection)
+        }
+
+        composeTestRule
+            .onNode(isDialog())
+            .assertIsDisplayed()
+
+        composeTestRule
+            .onAllNodesWithText("Type")
+            .filterToOne(hasAnyAncestor(isDialog()))
+            .assertIsDisplayed()
+    }
+
+    @Test
+    fun `when option is selected in VaultItemTypeSelection dialog add item action is sent`() {
+        mutableStateFlow.update {
+            it.copy(dialogState = VaultItemListingState.DialogState.VaultItemTypeSelection)
+        }
+
+        composeTestRule
+            .onNode(isDialog())
+            .assertIsDisplayed()
+
+        composeTestRule
+            .onAllNodesWithText("Card")
+            .filterToOne(hasAnyAncestor(isDialog()))
+            .performClick()
+
+        verify(exactly = 1) {
+            viewModel.trySendAction(VaultItemListingsAction.DismissDialogClick)
+            viewModel.trySendAction(
+                VaultItemListingsAction.ItemToAddToFolderSelected(
+                    CreateVaultItemType.CARD,
+                ),
+            )
+        }
+    }
 }
 
 private val ACTIVE_ACCOUNT_SUMMARY = AccountSummary(
diff --git a/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingViewModelTest.kt b/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingViewModelTest.kt
index 8b73181071..72ddd51863 100644
--- a/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingViewModelTest.kt
+++ b/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/VaultItemListingViewModelTest.kt
@@ -66,6 +66,7 @@ import com.x8bit.bitwarden.ui.platform.base.util.concat
 import com.x8bit.bitwarden.ui.platform.components.model.AccountSummary
 import com.x8bit.bitwarden.ui.platform.components.model.IconData
 import com.x8bit.bitwarden.ui.platform.feature.search.model.SearchType
+import com.x8bit.bitwarden.ui.vault.components.model.CreateVaultItemType
 import com.x8bit.bitwarden.ui.vault.feature.addedit.util.createMockPasskeyAssertionOptions
 import com.x8bit.bitwarden.ui.vault.feature.addedit.util.createMockPasskeyAttestationOptions
 import com.x8bit.bitwarden.ui.vault.feature.itemlisting.model.ListingItemOverflowAction
@@ -966,24 +967,23 @@ class VaultItemListingViewModelTest : BaseViewModelTest() {
 
     @Suppress("MaxLineLength")
     @Test
-    fun `AddVaultItemClick inside a folder should emit NavigateToAddVaultItem with a selected folder id`() =
-        runTest {
-            val viewModel = createVaultItemListingViewModel(
-                savedStateHandle = createSavedStateHandleWithVaultItemListingType(
-                    vaultItemListingType = VaultItemListingType.Folder(folderId = "id"),
+    fun `AddVaultItemClick inside a folder should show item selection dialog state`() {
+        val viewModel = createVaultItemListingViewModel(
+            savedStateHandle = createSavedStateHandleWithVaultItemListingType(
+                vaultItemListingType = VaultItemListingType.Folder(folderId = "id"),
+            ),
+        )
+        viewModel.trySendAction(VaultItemListingsAction.AddVaultItemClick)
+        assertEquals(
+            createVaultItemListingState(
+                itemListingType = VaultItemListingState.ItemListingType.Vault.Folder(
+                    folderId = "id",
                 ),
             )
-            viewModel.eventFlow.test {
-                viewModel.trySendAction(VaultItemListingsAction.AddVaultItemClick)
-                assertEquals(
-                    VaultItemListingEvent.NavigateToAddVaultItem(
-                        VaultItemCipherType.LOGIN,
-                        selectedFolderId = "id",
-                    ),
-                    awaitItem(),
-                )
-            }
-        }
+                .copy(dialogState = VaultItemListingState.DialogState.VaultItemTypeSelection),
+            viewModel.stateFlow.value,
+        )
+    }
 
     @Test
     fun `AddVaultItemClick for vault item should emit NavigateToAddVaultItem`() = runTest {
@@ -1008,6 +1008,51 @@ class VaultItemListingViewModelTest : BaseViewModelTest() {
         }
     }
 
+    @Test
+    fun `ItemToAddToFolderSelected sends NavigateToAddFolder for folder selection`() = runTest {
+        val viewModel = createVaultItemListingViewModel(
+            savedStateHandle = createSavedStateHandleWithVaultItemListingType(
+                vaultItemListingType = VaultItemListingType.Folder(""),
+            ),
+        )
+        viewModel.eventFlow.test {
+            viewModel.trySendAction(
+                VaultItemListingsAction.ItemToAddToFolderSelected(
+                    itemType = CreateVaultItemType.FOLDER,
+                ),
+            )
+            assertEquals(
+                VaultItemListingEvent.NavigateToAddFolder(
+                    parentFolderName = "",
+                ),
+                awaitItem(),
+            )
+        }
+    }
+
+    @Test
+    fun `ItemToAddToFolderSelected sends NavigateToAddFolder for any other selection`() = runTest {
+        val viewModel = createVaultItemListingViewModel(
+            savedStateHandle = createSavedStateHandleWithVaultItemListingType(
+                vaultItemListingType = VaultItemListingType.Folder("id"),
+            ),
+        )
+        viewModel.eventFlow.test {
+            viewModel.trySendAction(
+                VaultItemListingsAction.ItemToAddToFolderSelected(
+                    itemType = CreateVaultItemType.CARD,
+                ),
+            )
+            assertEquals(
+                VaultItemListingEvent.NavigateToAddVaultItem(
+                    vaultItemCipherType = VaultItemCipherType.CARD,
+                    selectedFolderId = "id",
+                ),
+                awaitItem(),
+            )
+        }
+    }
+
     @Test
     fun `FolderClick for vault item should emit NavigateToFolderItem`() = runTest {
         val viewModel = createVaultItemListingViewModel()
diff --git a/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/util/VaultItemListingDataExtensionsTest.kt b/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/util/VaultItemListingDataExtensionsTest.kt
index f0c0de9da0..53e59211f8 100644
--- a/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/util/VaultItemListingDataExtensionsTest.kt
+++ b/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/itemlisting/util/VaultItemListingDataExtensionsTest.kt
@@ -709,7 +709,7 @@ class VaultItemListingDataExtensionsTest {
         assertEquals(
             VaultItemListingState.ViewState.NoItems(
                 message = R.string.no_items_folder.asText(),
-                shouldShowAddButton = false,
+                shouldShowAddButton = true,
                 buttonText = R.string.new_item.asText(),
             ),
             vaultData.toViewState(
@@ -1002,6 +1002,7 @@ class VaultItemListingDataExtensionsTest {
             VaultItemListingState.ItemListingType.Vault.Folder(
                 folderId = "mockId-1",
                 folderName = "mockName-1",
+                fullyQualifiedName = "mockName-1",
             ),
             result,
         )
diff --git a/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/util/FolderViewExtensionsTest.kt b/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/util/FolderViewExtensionsTest.kt
index 8475352df2..b3b2e0334d 100644
--- a/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/util/FolderViewExtensionsTest.kt
+++ b/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/util/FolderViewExtensionsTest.kt
@@ -63,16 +63,19 @@ class FolderViewExtensionsTest {
     fun `toFolderDisplayName should return the correct name`() {
         val folderName = "Folder/test/2"
 
-        val folderList: List<FolderView> = listOf(
-            FolderView("2", "Folder/test", clock.instant()),
-            FolderView("3", "test/", clock.instant()),
-            FolderView("4", folderName, clock.instant()),
-            FolderView("5", "Folder", clock.instant()),
-        )
-
         assertEquals(
             "2",
-            folderName.toFolderDisplayName(folderList),
+            folderName.toFolderDisplayName(),
+        )
+    }
+
+    @Test
+    fun `toFolderDisplayName should return folder name unchanged if there are no sub folders`() {
+        val folderName = "test"
+
+        assertEquals(
+            folderName,
+            folderName.toFolderDisplayName(),
         )
     }
 }
diff --git a/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultScreenTest.kt b/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultScreenTest.kt
index 69c4deec65..9017407f20 100644
--- a/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultScreenTest.kt
+++ b/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultScreenTest.kt
@@ -50,8 +50,10 @@ import com.x8bit.bitwarden.ui.util.performLockAccountClick
 import com.x8bit.bitwarden.ui.util.performLogoutAccountClick
 import com.x8bit.bitwarden.ui.util.performRemoveAccountClick
 import com.x8bit.bitwarden.ui.util.performYesDialogButtonClick
+import com.x8bit.bitwarden.ui.vault.components.model.CreateVaultItemType
 import com.x8bit.bitwarden.ui.vault.feature.vault.model.VaultFilterData
 import com.x8bit.bitwarden.ui.vault.feature.vault.model.VaultFilterType
+import com.x8bit.bitwarden.ui.vault.model.VaultItemCipherType
 import com.x8bit.bitwarden.ui.vault.model.VaultItemListingType
 import io.mockk.every
 import io.mockk.just
@@ -63,6 +65,7 @@ import kotlinx.coroutines.flow.MutableStateFlow
 import kotlinx.coroutines.flow.update
 import org.junit.Assert.assertEquals
 import org.junit.Assert.assertFalse
+import org.junit.Assert.assertNull
 import org.junit.Assert.assertTrue
 import org.junit.Before
 import org.junit.Test
@@ -77,6 +80,8 @@ class VaultScreenTest : BaseComposeTest() {
     private var onDimBottomNavBarRequestCalled = false
     private var onNavigateToVerificationCodeScreen = false
     private var onNavigateToSearchScreen = false
+    private var onNavigateToAddFolderCalled = false
+    private var onNavigateToAddFolderParentFolderName: String? = null
     private val exitManager = mockk<ExitManager>(relaxed = true)
     private val intentManager = mockk<IntentManager>(relaxed = true)
     private val appReviewManager: AppReviewManager = mockk {
@@ -105,6 +110,10 @@ class VaultScreenTest : BaseComposeTest() {
                     onNavigateToImportLoginsCalled = true
                     assertEquals(SnackbarRelay.MY_VAULT_RELAY, it)
                 },
+                onNavigateToAddFolderScreen = { folderName ->
+                    onNavigateToAddFolderCalled = true
+                    onNavigateToAddFolderParentFolderName = folderName
+                },
                 exitManager = exitManager,
                 intentManager = intentManager,
                 appReviewManager = appReviewManager,
@@ -657,10 +666,10 @@ class VaultScreenTest : BaseComposeTest() {
     }
 
     @Test
-    fun `floating action button click should send AddItemClick action`() {
+    fun `floating action button click should send SelectAddItemType action`() {
         mutableStateFlow.update { it.copy(viewState = VaultState.ViewState.NoItems) }
         composeTestRule.onNodeWithContentDescription("Add Item").performClick()
-        verify { viewModel.trySendAction(VaultAction.AddItemClick) }
+        verify { viewModel.trySendAction(VaultAction.SelectAddItemType) }
     }
 
     @Test
@@ -670,12 +679,14 @@ class VaultScreenTest : BaseComposeTest() {
             .onNodeWithText("New login")
             .performScrollTo()
             .performClick()
-        verify { viewModel.trySendAction(VaultAction.AddItemClick) }
+        verify { viewModel.trySendAction(VaultAction.AddItemClick(CreateVaultItemType.LOGIN)) }
     }
 
     @Test
     fun `NavigateToAddItemScreen event should call onNavigateToVaultAddItemScreen`() {
-        mutableEventFlow.tryEmit(VaultEvent.NavigateToAddItemScreen)
+        mutableEventFlow.tryEmit(
+            VaultEvent.NavigateToAddItemScreen(type = VaultItemCipherType.LOGIN),
+        )
         assertTrue(onNavigateToVaultAddItemScreenCalled)
     }
 
@@ -1310,6 +1321,55 @@ class VaultScreenTest : BaseComposeTest() {
         dispatcher.advanceTimeByAndRunCurrent(4000L)
         verify(exactly = 1) { appReviewManager.promptForReview() }
     }
+
+    @Suppress("MaxLineLength")
+    @Test
+    fun `NavigateToAddItemScreen event calls onNavigateToAddFolder callback when cipher item type is FOLDER`() {
+        mutableEventFlow.tryEmit(VaultEvent.NavigateToAddFolder)
+        assertTrue(onNavigateToAddFolderCalled)
+        assertNull(onNavigateToAddFolderParentFolderName)
+    }
+
+    @Test
+    fun `SelectVaultAddItemType dialog state show vault item type selection dialog`() {
+        mutableStateFlow.update {
+            it.copy(dialog = VaultState.DialogState.SelectVaultAddItemType)
+        }
+
+        composeTestRule
+            .onNode(isDialog())
+            .assertIsDisplayed()
+
+        composeTestRule
+            .onAllNodesWithText("Type")
+            .filterToOne(hasAnyAncestor(isDialog()))
+            .assertIsDisplayed()
+    }
+
+    @Test
+    fun `when option is selected in SelectVaultAddItemType dialog add item action is sent`() {
+        mutableStateFlow.update {
+            it.copy(dialog = VaultState.DialogState.SelectVaultAddItemType)
+        }
+
+        composeTestRule
+            .onNode(isDialog())
+            .assertIsDisplayed()
+
+        composeTestRule
+            .onAllNodesWithText("Card")
+            .filterToOne(hasAnyAncestor(isDialog()))
+            .performClick()
+
+        verify(exactly = 1) {
+            viewModel.trySendAction(VaultAction.DialogDismiss)
+            viewModel.trySendAction(
+                VaultAction.AddItemClick(
+                    CreateVaultItemType.CARD,
+                ),
+            )
+        }
+    }
 }
 
 private val ACTIVE_ACCOUNT_SUMMARY = AccountSummary(
diff --git a/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultViewModelTest.kt b/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultViewModelTest.kt
index 1d2633ad46..e7a595368a 100644
--- a/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultViewModelTest.kt
+++ b/app/src/test/java/com/x8bit/bitwarden/ui/vault/feature/vault/VaultViewModelTest.kt
@@ -41,10 +41,12 @@ import com.x8bit.bitwarden.ui.platform.components.model.AccountSummary
 import com.x8bit.bitwarden.ui.platform.components.snackbar.BitwardenSnackbarData
 import com.x8bit.bitwarden.ui.platform.manager.snackbar.SnackbarRelay
 import com.x8bit.bitwarden.ui.platform.manager.snackbar.SnackbarRelayManager
+import com.x8bit.bitwarden.ui.vault.components.model.CreateVaultItemType
 import com.x8bit.bitwarden.ui.vault.feature.itemlisting.model.ListingItemOverflowAction
 import com.x8bit.bitwarden.ui.vault.feature.vault.model.VaultFilterData
 import com.x8bit.bitwarden.ui.vault.feature.vault.model.VaultFilterType
 import com.x8bit.bitwarden.ui.vault.feature.vault.util.toViewState
+import com.x8bit.bitwarden.ui.vault.model.VaultItemCipherType
 import com.x8bit.bitwarden.ui.vault.model.VaultItemListingType
 import io.mockk.coEvery
 import io.mockk.every
@@ -1155,11 +1157,12 @@ class VaultViewModelTest : BaseViewModelTest() {
     }
 
     @Test
-    fun `AddItemClick should emit NavigateToAddItemScreen`() = runTest {
+    fun `AddItemClick should emit NavigateToAddItemScreen with correct type`() = runTest {
         val viewModel = createViewModel()
+        val cipherType = CreateVaultItemType.CARD
         viewModel.eventFlow.test {
-            viewModel.trySendAction(VaultAction.AddItemClick)
-            assertEquals(VaultEvent.NavigateToAddItemScreen, awaitItem())
+            viewModel.trySendAction(VaultAction.AddItemClick(cipherType))
+            assertEquals(VaultEvent.NavigateToAddItemScreen(VaultItemCipherType.CARD), awaitItem())
         }
     }
 
@@ -1908,6 +1911,19 @@ class VaultViewModelTest : BaseViewModelTest() {
             }
         }
 
+    @Test
+    fun `SelectAddItemType action should set dialog state to SelectVaultAddItemType`() {
+        val viewModel = createViewModel()
+        viewModel.trySendAction(VaultAction.SelectAddItemType)
+        val expectedState = DEFAULT_STATE.copy(
+            dialog = VaultState.DialogState.SelectVaultAddItemType,
+        )
+        assertEquals(
+            expectedState,
+            viewModel.stateFlow.value,
+        )
+    }
+
     private fun createViewModel(): VaultViewModel =
         VaultViewModel(
             authRepository = authRepository,