diff --git a/Cargo.lock b/Cargo.lock
index a9b2e29ea0..3748f24933 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -5033,6 +5033,7 @@ dependencies = [
  "language",
  "menu",
  "postage",
+ "pretty_assertions",
  "project",
  "schemars",
  "serde",
diff --git a/Cargo.toml b/Cargo.toml
index 3f3953096e..26555f32cd 100644
--- a/Cargo.toml
+++ b/Cargo.toml
@@ -101,6 +101,7 @@ time = { version = "0.3", features = ["serde", "serde-well-known"] }
 toml = { version = "0.5" }
 tree-sitter = "0.20"
 unindent = { version = "0.1.7" }
+pretty_assertions = "1.3.0"
 
 [patch.crates-io]
 tree-sitter = { git = "https://github.com/tree-sitter/tree-sitter", rev = "49226023693107fba9a1191136a4f47f38cdca73" }
diff --git a/crates/collab/Cargo.toml b/crates/collab/Cargo.toml
index a87234ded7..0c752a2047 100644
--- a/crates/collab/Cargo.toml
+++ b/crates/collab/Cargo.toml
@@ -67,7 +67,7 @@ fs = { path = "../fs", features = ["test-support"] }
 git = { path = "../git", features = ["test-support"] }
 live_kit_client = { path = "../live_kit_client", features = ["test-support"] }
 lsp = { path = "../lsp", features = ["test-support"] }
-pretty_assertions = "1.3.0"
+pretty_assertions = "*"
 project = { path = "../project", features = ["test-support"] }
 rpc = { path = "../rpc", features = ["test-support"] }
 settings = { path = "../settings", features = ["test-support"] }
diff --git a/crates/fs/src/fs.rs b/crates/fs/src/fs.rs
index 592e6c9a53..ec8a249ff4 100644
--- a/crates/fs/src/fs.rs
+++ b/crates/fs/src/fs.rs
@@ -279,6 +279,9 @@ impl Fs for RealFs {
 
     async fn save(&self, path: &Path, text: &Rope, line_ending: LineEnding) -> Result<()> {
         let buffer_size = text.summary().len.min(10 * 1024);
+        if let Some(path) = path.parent() {
+            self.create_dir(path).await?;
+        }
         let file = smol::fs::File::create(path).await?;
         let mut writer = smol::io::BufWriter::with_capacity(buffer_size, file);
         for chunk in chunks(text, line_ending) {
@@ -1077,6 +1080,9 @@ impl Fs for FakeFs {
         self.simulate_random_delay().await;
         let path = normalize_path(path);
         let content = chunks(text, line_ending).collect();
+        if let Some(path) = path.parent() {
+            self.create_dir(path).await?;
+        }
         self.write_file_internal(path, content)?;
         Ok(())
     }
diff --git a/crates/project/Cargo.toml b/crates/project/Cargo.toml
index d6578c87ba..dbc0c617f2 100644
--- a/crates/project/Cargo.toml
+++ b/crates/project/Cargo.toml
@@ -64,7 +64,7 @@ itertools = "0.10"
 [dev-dependencies]
 ctor.workspace = true
 env_logger.workspace = true
-pretty_assertions = "1.3.0"
+pretty_assertions = "*"
 client = { path = "../client", features = ["test-support"] }
 collections = { path = "../collections", features = ["test-support"] }
 db = { path = "../db", features = ["test-support"] }
diff --git a/crates/project/src/worktree.rs b/crates/project/src/worktree.rs
index 20e693770f..a0497fa677 100644
--- a/crates/project/src/worktree.rs
+++ b/crates/project/src/worktree.rs
@@ -1001,10 +1001,25 @@ impl LocalWorktree {
 
         cx.spawn(|this, mut cx| async move {
             write.await?;
-            this.update(&mut cx, |this, cx| {
-                this.as_local_mut().unwrap().refresh_entry(path, None, cx)
-            })
-            .await
+            let (result, refreshes) = this.update(&mut cx, |this, cx| {
+                let mut refreshes = Vec::new();
+                for path in path.ancestors().skip(1) {
+                    refreshes.push(this.as_local_mut().unwrap().refresh_entry(
+                        path.into(),
+                        None,
+                        cx,
+                    ));
+                }
+                (
+                    this.as_local_mut().unwrap().refresh_entry(path, None, cx),
+                    refreshes,
+                )
+            });
+            for refresh in refreshes {
+                refresh.await.log_err();
+            }
+
+            result.await
         })
     }
 
diff --git a/crates/project/src/worktree_tests.rs b/crates/project/src/worktree_tests.rs
index f908d702eb..efc5f42369 100644
--- a/crates/project/src/worktree_tests.rs
+++ b/crates/project/src/worktree_tests.rs
@@ -936,6 +936,83 @@ async fn test_create_directory_during_initial_scan(cx: &mut TestAppContext) {
     );
 }
 
+#[gpui::test]
+async fn test_create_dir_all_on_create_entry(cx: &mut TestAppContext) {
+    let client_fake = cx.read(|cx| Client::new(FakeHttpClient::with_404_response(), cx));
+
+    let fs_fake = FakeFs::new(cx.background());
+    fs_fake.insert_tree(
+        "/root",
+        json!({
+            "a": {},
+        }),
+    )
+    .await;
+
+    let tree_fake = Worktree::local(
+        client_fake,
+        "/root".as_ref(),
+        true,
+        fs_fake,
+        Default::default(),
+        &mut cx.to_async(),
+    )
+    .await
+    .unwrap();
+
+    let entry = tree_fake
+        .update(cx, |tree, cx| {
+            tree.as_local_mut()
+                .unwrap()
+                .create_entry("a/b/c/d.txt".as_ref(), false, cx)
+        })
+        .await
+        .unwrap();
+    assert!(entry.is_file());
+
+    cx.foreground().run_until_parked();
+    tree_fake.read_with(cx, |tree, _| {
+        assert!(tree.entry_for_path("a/b/c/d.txt").unwrap().is_file());
+        assert!(tree.entry_for_path("a/b/c/").unwrap().is_dir());
+        assert!(tree.entry_for_path("a/b/").unwrap().is_dir());
+    });
+
+    let client_real = cx.read(|cx| Client::new(FakeHttpClient::with_404_response(), cx));
+
+    let fs_real = Arc::new(RealFs);
+    let temp_root = temp_tree(json!({
+        "a": {}
+    }));
+
+    let tree_real = Worktree::local(
+        client_real,
+        temp_root.path(),
+        true,
+        fs_real,
+        Default::default(),
+        &mut cx.to_async(),
+    )
+    .await
+    .unwrap();
+
+    let entry = tree_real
+        .update(cx, |tree, cx| {
+            tree.as_local_mut()
+                .unwrap()
+                .create_entry("a/b/c/d.txt".as_ref(), false, cx)
+        })
+        .await
+        .unwrap();
+    assert!(entry.is_file());
+
+    cx.foreground().run_until_parked();
+    tree_real.read_with(cx, |tree, _| {
+        assert!(tree.entry_for_path("a/b/c/d.txt").unwrap().is_file());
+        assert!(tree.entry_for_path("a/b/c/").unwrap().is_dir());
+        assert!(tree.entry_for_path("a/b/").unwrap().is_dir());
+    });
+}
+
 #[gpui::test(iterations = 100)]
 async fn test_random_worktree_operations_during_initial_scan(
     cx: &mut TestAppContext,
diff --git a/crates/project_panel/Cargo.toml b/crates/project_panel/Cargo.toml
index 55efc09deb..33606fccc4 100644
--- a/crates/project_panel/Cargo.toml
+++ b/crates/project_panel/Cargo.toml
@@ -27,6 +27,7 @@ serde_derive.workspace = true
 serde_json.workspace = true
 anyhow.workspace = true
 schemars.workspace = true
+pretty_assertions.workspace = true
 unicase = "2.6"
 
 [dev-dependencies]
diff --git a/crates/project_panel/src/project_panel.rs b/crates/project_panel/src/project_panel.rs
index 3f80e02317..57a45ddb16 100644
--- a/crates/project_panel/src/project_panel.rs
+++ b/crates/project_panel/src/project_panel.rs
@@ -64,7 +64,7 @@ pub struct ProjectPanel {
     pending_serialization: Task<Option<()>>,
 }
 
-#[derive(Copy, Clone)]
+#[derive(Copy, Clone, Debug)]
 struct Selection {
     worktree_id: WorktreeId,
     entry_id: ProjectEntryId,
@@ -588,6 +588,7 @@ impl ProjectPanel {
                     if selection.entry_id == edited_entry_id {
                         selection.worktree_id = worktree_id;
                         selection.entry_id = new_entry.id;
+                        this.expand_to_selection(cx);
                     }
                 }
                 this.update_visible_entries(None, cx);
@@ -965,6 +966,25 @@ impl ProjectPanel {
         Some((worktree, entry))
     }
 
+    fn expand_to_selection(&mut self, cx: &mut ViewContext<Self>) -> Option<()> {
+        let (worktree, entry) = self.selected_entry(cx)?;
+        let expanded_dir_ids = self.expanded_dir_ids.entry(worktree.id()).or_default();
+
+        for path in entry.path.ancestors() {
+            let Some(entry) = worktree.entry_for_path(path) else {
+                continue;
+            };
+            if entry.is_dir() {
+                if let Err(idx) = expanded_dir_ids.binary_search(&entry.id) {
+                    expanded_dir_ids.insert(idx, entry.id);
+                }
+            }
+        }
+
+
+        Some(())
+    }
+
     fn update_visible_entries(
         &mut self,
         new_selected_entry: Option<(WorktreeId, ProjectEntryId)>,
@@ -1139,6 +1159,7 @@ impl ProjectPanel {
                 for entry in visible_worktree_entries[entry_range].iter() {
                     let status = git_status_setting.then(|| entry.git_status).flatten();
 
+
                     let mut details = EntryDetails {
                         filename: entry
                             .path
@@ -1592,6 +1613,7 @@ impl ClipboardEntry {
 mod tests {
     use super::*;
     use gpui::{TestAppContext, ViewHandle};
+    use pretty_assertions::assert_eq;
     use project::FakeFs;
     use serde_json::json;
     use settings::SettingsStore;
@@ -2002,6 +2024,134 @@ mod tests {
         );
     }
 
+    #[gpui::test(iterations = 30)]
+    async fn test_adding_directories_via_file(cx: &mut gpui::TestAppContext) {
+        init_test(cx);
+
+        let fs = FakeFs::new(cx.background());
+        fs.insert_tree(
+            "/root1",
+            json!({
+                ".dockerignore": "",
+                ".git": {
+                    "HEAD": "",
+                },
+                "a": {
+                    "0": { "q": "", "r": "", "s": "" },
+                    "1": { "t": "", "u": "" },
+                    "2": { "v": "", "w": "", "x": "", "y": "" },
+                },
+                "b": {
+                    "3": { "Q": "" },
+                    "4": { "R": "", "S": "", "T": "", "U": "" },
+                },
+                "C": {
+                    "5": {},
+                    "6": { "V": "", "W": "" },
+                    "7": { "X": "" },
+                    "8": { "Y": {}, "Z": "" }
+                }
+            }),
+        )
+        .await;
+        fs.insert_tree(
+            "/root2",
+            json!({
+                "d": {
+                    "9": ""
+                },
+                "e": {}
+            }),
+        )
+        .await;
+
+        let project = Project::test(fs.clone(), ["/root1".as_ref(), "/root2".as_ref()], cx).await;
+        let (window_id, workspace) = cx.add_window(|cx| Workspace::test_new(project.clone(), cx));
+        let panel = workspace.update(cx, |workspace, cx| ProjectPanel::new(workspace, cx));
+
+        select_path(&panel, "root1", cx);
+        assert_eq!(
+            visible_entries_as_strings(&panel, 0..10, cx),
+            &[
+                "v root1  <== selected",
+                "    > .git",
+                "    > a",
+                "    > b",
+                "    > C",
+                "      .dockerignore",
+                "v root2",
+                "    > d",
+                "    > e",
+            ]
+        );
+
+        // Add a file with the root folder selected. The filename editor is placed
+        // before the first file in the root folder.
+        panel.update(cx, |panel, cx| panel.new_file(&NewFile, cx));
+        cx.read_window(window_id, |cx| {
+            let panel = panel.read(cx);
+            assert!(panel.filename_editor.is_focused(cx));
+        });
+        assert_eq!(
+            visible_entries_as_strings(&panel, 0..10, cx),
+            &[
+                "v root1",
+                "    > .git",
+                "    > a",
+                "    > b",
+                "    > C",
+                "      [EDITOR: '']  <== selected",
+                "      .dockerignore",
+                "v root2",
+                "    > d",
+                "    > e",
+            ]
+        );
+
+
+        let confirm = panel.update(cx, |panel, cx| {
+            panel.filename_editor.update(cx, |editor, cx| {
+                editor.set_text("bdir1/dir2/the-new-filename", cx)
+            });
+            panel.confirm(&Confirm, cx).unwrap()
+        });
+
+        assert_eq!(
+            visible_entries_as_strings(&panel, 0..10, cx),
+            &[
+                "v root1",
+                "    > .git",
+                "    > a",
+                "    > b",
+                "    > C",
+                "      [PROCESSING: 'bdir1/dir2/the-new-filename']  <== selected",
+                "      .dockerignore",
+                "v root2",
+                "    > d",
+                "    > e",
+            ]
+        );
+
+        confirm.await.unwrap();
+        assert_eq!(
+            visible_entries_as_strings(&panel, 0..13, cx),
+            &[
+                "v root1",
+                "    > .git",
+                "    > a",
+                "    > b",
+                "    v bdir1",
+                "        v dir2",
+                "              the-new-filename  <== selected",
+                "    > C",
+                "      .dockerignore",
+                "v root2",
+                "    > d",
+                "    > e",
+            ]
+        );
+    }
+
     #[gpui::test]
     async fn test_copy_paste(cx: &mut gpui::TestAppContext) {
         init_test(cx);
diff --git a/crates/settings/Cargo.toml b/crates/settings/Cargo.toml
index b5dc301a5c..6c1ded805b 100644
--- a/crates/settings/Cargo.toml
+++ b/crates/settings/Cargo.toml
@@ -38,5 +38,5 @@ tree-sitter-json = "*"
 gpui = { path = "../gpui", features = ["test-support"] }
 fs = { path = "../fs", features = ["test-support"] }
 indoc.workspace = true
-pretty_assertions = "1.3.0"
+pretty_assertions = "*"
 unindent.workspace = true