diff --git a/extensions/notebook/src/book/bookTocManager.ts b/extensions/notebook/src/book/bookTocManager.ts
index b55a510fc4..2ad7fe606a 100644
--- a/extensions/notebook/src/book/bookTocManager.ts
+++ b/extensions/notebook/src/book/bookTocManager.ts
@@ -460,7 +460,6 @@ export class BookTocManager implements IBookTocManager {
 
 	public async addNewTocEntry(pathDetails: TocEntryPathHandler, bookItem: BookTreeItem, isSection?: boolean): Promise<void> {
 		let findSection: JupyterBookSection | undefined = undefined;
-		await fs.writeFile(pathDetails.filePath, '');
 		if (bookItem.contextValue === BookTreeItemType.section) {
 			findSection = { file: bookItem.book.page.file, title: bookItem.book.page.title };
 		}
@@ -470,8 +469,10 @@ export class BookTocManager implements IBookTocManager {
 		};
 
 		if (isSection) {
+			await fs.mkdir(path.dirname(pathDetails.filePath));
 			fileEntryInToc.sections = [];
 		}
+		await fs.writeFile(pathDetails.filePath, '');
 
 		if (bookItem.book.version === BookVersion.v1) {
 			fileEntryInToc = convertTo(BookVersion.v1, fileEntryInToc);
diff --git a/extensions/notebook/src/dialog/addTocEntryDialog.ts b/extensions/notebook/src/dialog/addTocEntryDialog.ts
index 944ab4f0ef..a9ffe08c7d 100644
--- a/extensions/notebook/src/dialog/addTocEntryDialog.ts
+++ b/extensions/notebook/src/dialog/addTocEntryDialog.ts
@@ -99,7 +99,8 @@ export class AddTocEntryDialog {
 	public async createFile(fileName: string, titleName: string): Promise<boolean> {
 		try {
 			const dirPath = this._bookItem.contextValue === BookTreeItemType.savedBook ? this._bookItem.rootContentPath : path.dirname(this._bookItem.book.contentPath);
-			const filePath = path.posix.join(dirPath, fileName).concat(this._extension);
+			// For sections, we pass the name of the section in the path to create a directory with the same name
+			const filePath = this._isSection ? path.posix.join(dirPath, titleName, fileName).concat(this._extension) : path.posix.join(dirPath, fileName).concat(this._extension);
 			await this.validatePath(dirPath, fileName.concat(this._extension));
 			const pathDetails = new TocEntryPathHandler(filePath, this._bookItem.rootContentPath, titleName);
 			await this._tocManager.addNewTocEntry(pathDetails, this._bookItem, this._isSection);
diff --git a/extensions/notebook/src/test/book/bookTocManager.test.ts b/extensions/notebook/src/test/book/bookTocManager.test.ts
index 3704d49e14..1e9ab2f4c1 100644
--- a/extensions/notebook/src/test/book/bookTocManager.test.ts
+++ b/extensions/notebook/src/test/book/bookTocManager.test.ts
@@ -576,8 +576,7 @@ describe('BookTocManagerTests', function () {
 					bookTocManager = new BookTocManager(sourceBookModel);
 					const fileBasename = `addSectionTest-${generateGuid()}`;
 					const sectionTitle = 'Section Test';
-					const testFilePath = path.join(run.sectionA.contentFolder, 'sectionA', fileBasename).concat(FileExtension.Markdown);
-					await fs.writeFile(testFilePath, '');
+					const testFilePath = path.join(run.sectionA.contentFolder, 'sectionA', sectionTitle,fileBasename).concat(FileExtension.Markdown);
 					const pathDetails = new TocEntryPathHandler(testFilePath, run.sourceBook.root, sectionTitle);
 					await bookTocManager.addNewTocEntry(pathDetails, sectionA, true);
 					let toc: JupyterBookSection[] = yaml.safeLoad((await fs.promises.readFile(run.sourceBook.tocPath)).toString());