diff --git a/extensions/sql-database-projects/src/controllers/projectController.ts b/extensions/sql-database-projects/src/controllers/projectController.ts
index 9cb3fe5230..e5bd72297c 100644
--- a/extensions/sql-database-projects/src/controllers/projectController.ts
+++ b/extensions/sql-database-projects/src/controllers/projectController.ts
@@ -101,6 +101,12 @@ export class ProjectsController {
 		}
 	}
 
+	/**
+	 * Creates a new folder with the project name in the specified location, and places the new .sqlproj inside it
+	 * @param newProjName
+	 * @param folderUri
+	 * @param projectGuid
+	 */
 	public async createNewProject(newProjName: string, folderUri: Uri, projectGuid?: string): Promise<string> {
 		if (projectGuid && !UUID.isUUID(projectGuid)) {
 			throw new Error(`Specified GUID is invalid: '${projectGuid}'`);
@@ -119,7 +125,7 @@ export class ProjectsController {
 			newProjFileName += constants.sqlprojExtension;
 		}
 
-		const newProjFilePath = path.join(folderUri.fsPath, newProjFileName);
+		const newProjFilePath = path.join(folderUri.fsPath, path.parse(newProjFileName).name, newProjFileName);
 
 		let fileExists = false;
 		try {
diff --git a/extensions/sql-database-projects/src/test/projectController.test.ts b/extensions/sql-database-projects/src/test/projectController.test.ts
index 11bcfb9107..12b2489910 100644
--- a/extensions/sql-database-projects/src/test/projectController.test.ts
+++ b/extensions/sql-database-projects/src/test/projectController.test.ts
@@ -166,7 +166,7 @@ describe.skip('ProjectsController: project controller operations', function ():
 			let profilePath = await testUtils.createTestFile(baselines.publishProfileBaseline, 'publishProfile.publish.xml');
 			const projController = new ProjectsController(testContext.apiWrapper.object, new SqlDatabaseProjectTreeViewProvider());
 
-			let result = await projController.readPublishProfile(vscode.Uri.parse(profilePath));
+			let result = await projController.readPublishProfile(vscode.Uri.file(profilePath));
 			should(result.databaseName).equal('targetDb');
 			should(Object.keys(result.sqlCmdVariables).length).equal(1);
 			should(result.sqlCmdVariables['ProdDatabaseName']).equal('MyProdDatabase');