diff --git a/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/Contracts/Folders/AddFolder.cs b/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/Contracts/Folders/AddFolder.cs
new file mode 100644
index 00000000..8b5de800
--- /dev/null
+++ b/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/Contracts/Folders/AddFolder.cs
@@ -0,0 +1,26 @@
+//
+// Copyright (c) Microsoft. All rights reserved.
+// Licensed under the MIT license. See LICENSE file in the project root for full license information.
+//
+
+using Microsoft.SqlTools.Hosting.Protocol.Contracts;
+using Microsoft.SqlTools.ServiceLayer.Utility;
+
+namespace Microsoft.SqlTools.ServiceLayer.SqlProjects.Contracts
+{
+    /// <summary>
+    /// Parameters for adding, deleting, or excluding a folder
+    /// </summary>
+    public class FolderParams : SqlProjectParams
+    {
+        /// <summary>
+        /// Path of the folder, typically relative to the .sqlproj file
+        /// </summary>
+        public string Path { get; set; }
+    }
+
+    public class AddFolderRequest
+    {
+        public static readonly RequestType<FolderParams, ResultStatus> Type = RequestType<FolderParams, ResultStatus>.Create("sqlProjects/addFolder");
+    }
+}
diff --git a/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/Contracts/Folders/DeleteFolder.cs b/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/Contracts/Folders/DeleteFolder.cs
new file mode 100644
index 00000000..00cca65b
--- /dev/null
+++ b/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/Contracts/Folders/DeleteFolder.cs
@@ -0,0 +1,15 @@
+//
+// Copyright (c) Microsoft. All rights reserved.
+// Licensed under the MIT license. See LICENSE file in the project root for full license information.
+//
+
+using Microsoft.SqlTools.Hosting.Protocol.Contracts;
+using Microsoft.SqlTools.ServiceLayer.Utility;
+
+namespace Microsoft.SqlTools.ServiceLayer.SqlProjects.Contracts
+{
+    public class DeleteFolderRequest
+    {
+        public static readonly RequestType<FolderParams, ResultStatus> Type = RequestType<FolderParams, ResultStatus>.Create("sqlProjects/deleteFolder");
+    }
+}
diff --git a/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/SqlProjectsService.cs b/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/SqlProjectsService.cs
index 2e81496a..0d8b212f 100644
--- a/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/SqlProjectsService.cs
+++ b/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/SqlProjectsService.cs
@@ -50,6 +50,10 @@ namespace Microsoft.SqlTools.ServiceLayer.SqlProjects
             serviceHost.SetRequestHandler(DeleteSqlObjectScriptRequest.Type, HandleDeleteSqlObjectScriptRequest, isParallelProcessingSupported: false);
             serviceHost.SetRequestHandler(ExcludeSqlObjectScriptRequest.Type, HandleExcludeSqlObjectScriptRequest, isParallelProcessingSupported: false);
 
+            // Folder functions
+            serviceHost.SetRequestHandler(AddFolderRequest.Type, HandleAddFolderRequest, isParallelProcessingSupported: false);
+            serviceHost.SetRequestHandler(DeleteFolderRequest.Type, HandleDeleteFolderRequest, isParallelProcessingSupported: false);
+
             // SQLCMD variable functions
             serviceHost.SetRequestHandler(AddSqlCmdVariableRequest.Type, HandleAddSqlCmdVariableRequest, isParallelProcessingSupported: false);
             serviceHost.SetRequestHandler(DeleteSqlCmdVariableRequest.Type, HandleDeleteSqlCmdVariableRequest, isParallelProcessingSupported: false);
@@ -143,6 +147,20 @@ namespace Microsoft.SqlTools.ServiceLayer.SqlProjects
 
         #endregion
 
+        #region Folder functions
+
+        internal async Task HandleAddFolderRequest(FolderParams requestParams, RequestContext<ResultStatus> requestContext)
+        {
+            await RunWithErrorHandling(() => GetProject(requestParams.ProjectUri).Folders.Add(new Folder(requestParams.Path)), requestContext);
+        }
+
+        internal async Task HandleDeleteFolderRequest(FolderParams requestParams, RequestContext<ResultStatus> requestContext)
+        {
+            await RunWithErrorHandling(() => GetProject(requestParams.ProjectUri).Folders.Delete(requestParams.Path), requestContext);
+        }
+
+        #endregion
+
         #region SQLCMD variable functions
 
         internal async Task HandleAddSqlCmdVariableRequest(AddSqlCmdVariableParams requestParams, RequestContext<ResultStatus> requestContext)
diff --git a/test/Microsoft.SqlTools.ServiceLayer.IntegrationTests/SqlProjects/SqlProjectsServiceTests.cs b/test/Microsoft.SqlTools.ServiceLayer.IntegrationTests/SqlProjects/SqlProjectsServiceTests.cs
index bb17dc9d..18e1e89d 100644
--- a/test/Microsoft.SqlTools.ServiceLayer.IntegrationTests/SqlProjects/SqlProjectsServiceTests.cs
+++ b/test/Microsoft.SqlTools.ServiceLayer.IntegrationTests/SqlProjects/SqlProjectsServiceTests.cs
@@ -252,6 +252,37 @@ namespace Microsoft.SqlTools.ServiceLayer.IntegrationTests.SqlProjects
             Assert.IsFalse(service.Projects[projectUri].DatabaseReferences.Any(x => x is SqlProjectReference), "Database references list expected to not contain the SQL Project reference");
         }
 
+        [Test]
+        public async Task TestFolderAddDelete()
+        {
+            // Setup
+            SqlProjectsService service = new();
+            string projectUri = await service.CreateSqlProject();
+            Assert.AreEqual(0, service.Projects[projectUri].Folders.Count, "Baseline number of folders");
+
+            // Validate adding a folder
+            MockRequest<ResultStatus> requestMock = new();
+            FolderParams folderParams = new FolderParams()
+            {
+                ProjectUri = projectUri,
+                Path = "TestFolder"
+            };
+
+            await service.HandleAddFolderRequest(folderParams, requestMock.Object);
+
+            requestMock.AssertSuccess(nameof(service.HandleAddFolderRequest));
+            Assert.AreEqual(1, service.Projects[projectUri].Folders.Count, "Folder count after add");
+            Assert.IsTrue(Directory.Exists(Path.Join(Path.GetDirectoryName(projectUri), folderParams.Path)), $"Subfolder '{folderParams.Path}' expected to exist on disk");
+            Assert.IsTrue(service.Projects[projectUri].Folders.Contains(folderParams.Path), $"SqlObjectScripts expected to contain {folderParams.Path}");
+
+            // Validate deleting a folder
+            requestMock = new();
+            await service.HandleDeleteFolderRequest(folderParams, requestMock.Object);
+
+            requestMock.AssertSuccess(nameof(service.HandleDeleteFolderRequest));
+            Assert.AreEqual(0, service.Projects[projectUri].Folders.Count, "Folder count after delete");
+        }
+
         [Test]
         public async Task TestSqlCmdVariablesAddDelete()
         {