diff --git a/packages/frontend/src/App.tsx b/packages/frontend/src/App.tsx
index 25578fe..8646dd0 100644
--- a/packages/frontend/src/App.tsx
+++ b/packages/frontend/src/App.tsx
@@ -251,6 +251,74 @@ export default function RekordboxReader() {
     }
   };
 
+  const handleCreateFolder = async (name: string) => {
+    const newFolder: PlaylistNode = {
+      id: uuidv4(),
+      name,
+      type: 'folder',
+      children: [],
+    };
+    const updatedPlaylists = [...playlists, newFolder];
+    const savedPlaylists = await api.savePlaylists(updatedPlaylists);
+    setPlaylists(savedPlaylists);
+  };
+
+  const handleMovePlaylist = async (playlistName: string, targetFolderName: string | null) => {
+    let updatedPlaylists = [...playlists];
+    let playlistToMove: PlaylistNode | null = null;
+
+    // Helper function to remove playlist from its current location
+    const removePlaylist = (nodes: PlaylistNode[]): PlaylistNode[] => {
+      return nodes.reduce((acc: PlaylistNode[], node) => {
+        if (node.name === playlistName) {
+          playlistToMove = node;
+          return acc;
+        }
+        if (node.type === 'folder' && node.children) {
+          return [...acc, {
+            ...node,
+            children: removePlaylist(node.children)
+          }];
+        }
+        return [...acc, node];
+      }, []);
+    };
+
+    // First, remove the playlist from its current location
+    updatedPlaylists = removePlaylist(updatedPlaylists);
+
+    if (!playlistToMove) return; // Playlist not found
+
+    if (targetFolderName === null) {
+      // Move to root level
+      updatedPlaylists.push(playlistToMove);
+    } else {
+      // Move to target folder
+      const addToFolder = (nodes: PlaylistNode[]): PlaylistNode[] => {
+        return nodes.map(node => {
+          if (node.name === targetFolderName && node.type === 'folder') {
+            return {
+              ...node,
+              children: [...(node.children || []), playlistToMove!]
+            };
+          }
+          if (node.type === 'folder' && node.children) {
+            return {
+              ...node,
+              children: addToFolder(node.children)
+            };
+          }
+          return node;
+        });
+      };
+
+      updatedPlaylists = addToFolder(updatedPlaylists);
+    }
+
+    const savedPlaylists = await api.savePlaylists(updatedPlaylists);
+    setPlaylists(savedPlaylists);
+  };
+
   const displayedSongs = currentPlaylist === "All Songs"
     ? songs
     : songs.filter((song: Song) => {
@@ -322,6 +390,8 @@ export default function RekordboxReader() {
         if (isMobile) onClose();
       }}
       onPlaylistDelete={handlePlaylistDelete}
+      onFolderCreate={handleCreateFolder}
+      onPlaylistMove={handleMovePlaylist}
     />
   );
 
diff --git a/packages/frontend/src/components/PlaylistManager.tsx b/packages/frontend/src/components/PlaylistManager.tsx
index 3578c50..9670229 100644
--- a/packages/frontend/src/components/PlaylistManager.tsx
+++ b/packages/frontend/src/components/PlaylistManager.tsx
@@ -19,9 +19,12 @@ import {
   MenuItem,
   IconButton,
   Collapse,
+  MenuDivider,
+  MenuGroup,
+  useToast
 } from "@chakra-ui/react";
-import { ChevronDownIcon, DeleteIcon, ChevronRightIcon } from "@chakra-ui/icons";
-import React, { useState } from "react";
+import { ChevronDownIcon, DeleteIcon, ChevronRightIcon, AddIcon, ViewIcon } from "@chakra-ui/icons";
+import React, { useState, useCallback } from "react";
 import { PlaylistNode } from "../types/interfaces";
 
 interface PlaylistManagerProps {
@@ -30,6 +33,8 @@ interface PlaylistManagerProps {
   onPlaylistCreate: (name: string) => void;
   onPlaylistSelect: (name: string | null) => void;
   onPlaylistDelete: (name: string) => void;
+  onFolderCreate: (name: string) => void;
+  onPlaylistMove: (playlistName: string, targetFolderName: string | null) => void;
 }
 
 const getButtonStyles = (isSelected: boolean) => ({
@@ -57,6 +62,8 @@ interface PlaylistItemProps {
   selectedItem: string | null;
   onPlaylistSelect: (name: string | null) => void;
   onPlaylistDelete: (name: string) => void;
+  onPlaylistMove: (playlistName: string, targetFolderName: string | null) => void;
+  allFolders: { name: string }[];
 }
 
 const PlaylistItem: React.FC<PlaylistItemProps> = ({
@@ -65,9 +72,11 @@ const PlaylistItem: React.FC<PlaylistItemProps> = ({
   selectedItem,
   onPlaylistSelect,
   onPlaylistDelete,
+  onPlaylistMove,
+  allFolders,
 }) => {
   const [isOpen, setIsOpen] = useState(true);
-  const indent = level * 16; // 16px indent per level
+  const indent = level * 20; // Increased indent per level
 
   if (node.type === 'folder') {
     return (
@@ -98,6 +107,8 @@ const PlaylistItem: React.FC<PlaylistItemProps> = ({
                 selectedItem={selectedItem}
                 onPlaylistSelect={onPlaylistSelect}
                 onPlaylistDelete={onPlaylistDelete}
+                onPlaylistMove={onPlaylistMove}
+                allFolders={allFolders}
               />
             ))}
           </VStack>
@@ -127,6 +138,27 @@ const PlaylistItem: React.FC<PlaylistItemProps> = ({
           _hover={{ color: "white", bg: "whiteAlpha.200" }}
         />
         <MenuList bg="gray.800" borderColor="gray.700">
+          <MenuGroup title="Move to folder">
+            <MenuItem
+              bg="gray.800"
+              _hover={{ bg: "gray.700" }}
+              onClick={() => onPlaylistMove(node.name, null)}
+            >
+              Root level
+            </MenuItem>
+            <MenuDivider />
+            {allFolders.map((folder) => (
+              <MenuItem
+                key={folder.name}
+                bg="gray.800"
+                _hover={{ bg: "gray.700" }}
+                onClick={() => onPlaylistMove(node.name, folder.name)}
+              >
+                {folder.name}
+              </MenuItem>
+            ))}
+          </MenuGroup>
+          <MenuDivider />
           <MenuItem
             bg="gray.800"
             color="red.300"
@@ -148,15 +180,43 @@ export const PlaylistManager: React.FC<PlaylistManagerProps> = ({
   onPlaylistCreate,
   onPlaylistSelect,
   onPlaylistDelete,
+  onFolderCreate,
+  onPlaylistMove,
 }) => {
-  const { isOpen, onOpen, onClose } = useDisclosure();
+  const { isOpen: isPlaylistModalOpen, onOpen: onPlaylistModalOpen, onClose: onPlaylistModalClose } = useDisclosure();
+  const { isOpen: isFolderModalOpen, onOpen: onFolderModalOpen, onClose: onFolderModalClose } = useDisclosure();
   const [newPlaylistName, setNewPlaylistName] = useState("");
+  const [newFolderName, setNewFolderName] = useState("");
+
+  // Helper function to get all folders from the playlist tree
+  const getAllFolders = useCallback((nodes: PlaylistNode[]): { name: string }[] => {
+    let result: { name: string }[] = [];
+    for (const node of nodes) {
+      if (node.type === 'folder') {
+        result.push({ name: node.name });
+        if (node.children) {
+          result = result.concat(getAllFolders(node.children));
+        }
+      }
+    }
+    return result;
+  }, []);
+
+  const allFolders = getAllFolders(playlists);
 
   const handleCreatePlaylist = () => {
     if (newPlaylistName.trim()) {
       onPlaylistCreate(newPlaylistName);
       setNewPlaylistName("");
-      onClose();
+      onPlaylistModalClose();
+    }
+  };
+
+  const handleCreateFolder = () => {
+    if (newFolderName.trim()) {
+      onFolderCreate(newFolderName);
+      setNewFolderName("");
+      onFolderModalClose();
     }
   };
 
@@ -177,27 +237,47 @@ export const PlaylistManager: React.FC<PlaylistManagerProps> = ({
             selectedItem={selectedItem}
             onPlaylistSelect={onPlaylistSelect}
             onPlaylistDelete={onPlaylistDelete}
+            onPlaylistMove={onPlaylistMove}
+            allFolders={allFolders}
           />
         ))}
       </VStack>
 
-      <Button
-        onClick={onOpen}
-        colorScheme="blue"
-        size="sm"
-        width="100%"
-        borderRadius="md"
-        _hover={{
-          transform: "translateY(-1px)",
-          boxShadow: "sm",
-        }}
-      >
-        Create New Playlist
-      </Button>
+      <Flex gap={2}>
+        <Button
+          onClick={onPlaylistModalOpen}
+          colorScheme="blue"
+          size="sm"
+          flex={1}
+          leftIcon={<AddIcon />}
+          borderRadius="md"
+          _hover={{
+            transform: "translateY(-1px)",
+            boxShadow: "sm",
+          }}
+        >
+          New Playlist
+        </Button>
+        <Button
+          onClick={onFolderModalOpen}
+          colorScheme="teal"
+          size="sm"
+          flex={1}
+          leftIcon={<ViewIcon />}
+          borderRadius="md"
+          _hover={{
+            transform: "translateY(-1px)",
+            boxShadow: "sm",
+          }}
+        >
+          New Folder
+        </Button>
+      </Flex>
 
+      {/* New Playlist Modal */}
       <Modal
-        isOpen={isOpen}
-        onClose={onClose}
+        isOpen={isPlaylistModalOpen}
+        onClose={onPlaylistModalClose}
         isCentered
         motionPreset="slideInBottom"
       >
@@ -242,7 +322,67 @@ export const PlaylistManager: React.FC<PlaylistManagerProps> = ({
             </Button>
             <Button
               variant="ghost"
-              onClick={onClose}
+              onClick={onPlaylistModalClose}
+              color="gray.300"
+              _hover={{
+                bg: "whiteAlpha.200",
+              }}
+            >
+              Cancel
+            </Button>
+          </ModalFooter>
+        </ModalContent>
+      </Modal>
+
+      {/* New Folder Modal */}
+      <Modal
+        isOpen={isFolderModalOpen}
+        onClose={onFolderModalClose}
+        isCentered
+        motionPreset="slideInBottom"
+      >
+        <ModalOverlay bg="blackAlpha.700" backdropFilter="blur(5px)" />
+        <ModalContent
+          bg="gray.800"
+          borderRadius="xl"
+          boxShadow="xl"
+          border="1px"
+          borderColor="gray.700"
+        >
+          <ModalHeader color="white">Create New Folder</ModalHeader>
+          <ModalCloseButton color="white" />
+          <ModalBody pb={6}>
+            <Input
+              value={newFolderName}
+              onChange={(e) => setNewFolderName(e.target.value)}
+              placeholder="Enter folder name"
+              bg="gray.700"
+              border="none"
+              color="white"
+              _placeholder={{ color: "gray.400" }}
+              _focus={{
+                boxShadow: "0 0 0 1px teal.500",
+                borderColor: "teal.500",
+              }}
+            />
+          </ModalBody>
+
+          <ModalFooter>
+            <Button
+              colorScheme="teal"
+              mr={3}
+              onClick={handleCreateFolder}
+              isDisabled={!newFolderName.trim()}
+              _hover={{
+                transform: "translateY(-1px)",
+                boxShadow: "sm",
+              }}
+            >
+              Create
+            </Button>
+            <Button
+              variant="ghost"
+              onClick={onFolderModalClose}
               color="gray.300"
               _hover={{
                 bg: "whiteAlpha.200",