diff --git a/Packages.props b/Packages.props
index d662de1e..cd4afd99 100644
--- a/Packages.props
+++ b/Packages.props
@@ -20,7 +20,7 @@
 
 		<PackageReference Update="Microsoft.Data.SqlClient.AlwaysEncrypted.AzureKeyVaultProvider" Version="1.1.1" />
 		<PackageReference Update="Microsoft.SqlServer.Management.SmoMetadataProvider" Version="170.12.0" />
-		<PackageReference Update="Microsoft.SqlServer.DacFx" Version="161.8085.0-preview" />
+		<PackageReference Update="Microsoft.SqlServer.DacFx" Version="161.8406.0-preview" />
 		<PackageReference Update="Microsoft.SqlServer.DacFx.Projects" Version="161.8093.0-alpha" />
 		<PackageReference Update="Microsoft.Azure.Kusto.Data" Version="9.0.4" />
 		<PackageReference Update="Microsoft.Azure.Kusto.Language" Version="9.0.4" />
diff --git a/src/Microsoft.SqlTools.ServiceLayer/SchemaCompare/Contracts/SchemaCompareRequest.cs b/src/Microsoft.SqlTools.ServiceLayer/SchemaCompare/Contracts/SchemaCompareRequest.cs
index eaa23505..1e33cec3 100644
--- a/src/Microsoft.SqlTools.ServiceLayer/SchemaCompare/Contracts/SchemaCompareRequest.cs
+++ b/src/Microsoft.SqlTools.ServiceLayer/SchemaCompare/Contracts/SchemaCompareRequest.cs
@@ -5,6 +5,7 @@
 
 #nullable disable
 using System.Collections.Generic;
+using Microsoft.SqlServer.Dac;
 using Microsoft.SqlServer.Dac.Compare;
 using Microsoft.SqlTools.Hosting.Protocol.Contracts;
 using Microsoft.SqlTools.ServiceLayer.Connection.Contracts;
@@ -70,6 +71,11 @@ namespace Microsoft.SqlTools.ServiceLayer.SchemaCompare.Contracts
         /// Connection details
         /// </summary>
         public ConnectionDetails ConnectionDetails { get; set; }
+
+        /// <summary>
+        /// Extract target of the project used when extracting a database to file system or updating the project from database
+        /// </summary>
+        public DacExtractTarget? ExtractTarget { get; set; }
     }
 
     /// <summary>
diff --git a/src/Microsoft.SqlTools.ServiceLayer/SchemaCompare/SchemaCompareUtils.cs b/src/Microsoft.SqlTools.ServiceLayer/SchemaCompare/SchemaCompareUtils.cs
index 3b4e3392..b85c6e24 100644
--- a/src/Microsoft.SqlTools.ServiceLayer/SchemaCompare/SchemaCompareUtils.cs
+++ b/src/Microsoft.SqlTools.ServiceLayer/SchemaCompare/SchemaCompareUtils.cs
@@ -176,7 +176,9 @@ namespace Microsoft.SqlTools.ServiceLayer.SchemaCompare
             {
                 case SchemaCompareEndpointType.Project:
                     {
-                        return new SchemaCompareProjectEndpoint(endpointInfo.ProjectFilePath, endpointInfo.TargetScripts, endpointInfo.DataSchemaProvider);
+                        return endpointInfo?.ExtractTarget != null
+                            ? new SchemaCompareProjectEndpoint(endpointInfo.ProjectFilePath, endpointInfo.TargetScripts, endpointInfo.DataSchemaProvider, (DacExtractTarget)endpointInfo?.ExtractTarget)
+                            : new SchemaCompareProjectEndpoint(endpointInfo.ProjectFilePath, endpointInfo.TargetScripts, endpointInfo.DataSchemaProvider);
                     }
                 case SchemaCompareEndpointType.Dacpac:
                     {
diff --git a/test/Microsoft.SqlTools.ServiceLayer.IntegrationTests/SchemaCompare/SchemaCompareServiceTests.cs b/test/Microsoft.SqlTools.ServiceLayer.IntegrationTests/SchemaCompare/SchemaCompareServiceTests.cs
index 944bb946..0911959d 100644
--- a/test/Microsoft.SqlTools.ServiceLayer.IntegrationTests/SchemaCompare/SchemaCompareServiceTests.cs
+++ b/test/Microsoft.SqlTools.ServiceLayer.IntegrationTests/SchemaCompare/SchemaCompareServiceTests.cs
@@ -1200,6 +1200,41 @@ WITH VALUES
             await CreateAndOpenScmp(SchemaCompareEndpointType.Project, SchemaCompareEndpointType.Project);
         }
 
+        /// <summary>
+        /// Verify folder structure gets stored in scmp file for project endpoint
+        /// </summary>
+        [Test]
+        public async Task VerifyExtractTargetInScmpFile()
+        {
+            SqlTestDb sourceDb = await SqlTestDb.CreateNewAsync(TestServerType.OnPrem, false, null, SourceScript, "SchemaCompareOpenScmpSource");
+            SqlTestDb targetDb = await SqlTestDb.CreateNewAsync(TestServerType.OnPrem, false, null, TargetScript, "SchemaCompareOpenScmpTarget");
+
+           try
+            {
+                SchemaCompareEndpoint sourceEndpoint = CreateSchemaCompareEndpoint(sourceDb, SchemaCompareEndpointType.Database);
+                SchemaCompareEndpoint targetEndpoint = CreateSchemaCompareEndpoint(targetDb, SchemaCompareEndpointType.Project, true);
+
+                // create a comparison and exclude the first difference
+                SchemaComparison compare = new SchemaComparison(sourceEndpoint, targetEndpoint);
+                SchemaComparisonResult result = compare.Compare();
+                Assert.That(result.Differences, Is.Not.Empty);
+
+                // save to scmp
+                string folderPath = Path.Combine(Environment.GetFolderPath(Environment.SpecialFolder.LocalApplicationData), "SchemaCompareTest");
+                Directory.CreateDirectory(folderPath);
+                string filePath = Path.Combine(folderPath, string.Format("SchemaCompareOpenScmpTest{0}.scmp", DateTime.Now.ToFileTime()));
+                compare.SaveToFile(filePath);
+
+                SchemaCompareTestUtils.VerifyAndCleanup(Directory.GetParent((targetEndpoint as SchemaCompareProjectEndpoint).ProjectFilePath).FullName);
+                await VerifyContentAndCleanupAsync(filePath, "<FolderStructure>ObjectType</FolderStructure>");
+            }
+            finally
+            {
+                sourceDb.Cleanup();
+                targetDb.Cleanup();
+            }
+        }
+
         /// <summary>
         /// Verify the schema compare Service Calls ends to end
         /// </summary>
@@ -1594,6 +1629,23 @@ WITH VALUES
             }
         }
 
+        private async Task VerifyContentAndCleanupAsync(string outputFilePath, string textToMatch)
+        {
+            // Verify it was created
+            Assert.True(File.Exists(outputFilePath), "The output file did not get generated.");
+
+            //Verify the contents contain the stringToMatch
+            string output = await File.ReadAllTextAsync(outputFilePath);
+
+            Assert.True(output.Contains(textToMatch), $"The output doesn't contain the string. Pattern expected {Environment.NewLine} {textToMatch} {Environment.NewLine} Actual file {Environment.NewLine} {output}");
+
+            // Remove the file
+            if (File.Exists(outputFilePath))
+            {
+                File.Delete(outputFilePath);
+            }
+        }
+
         private void ValidateSchemaCompareWithExcludeIncludeResults(SchemaCompareOperation schemaCompareOperation, int? expectedDifferencesCount = null)
         {
             schemaCompareOperation.Execute(TaskExecutionMode.Execute);
@@ -1794,7 +1846,7 @@ WITH VALUES
             {
                 string projectPath = SchemaCompareTestUtils.CreateProject(db, isProjectTarget ? "TargetProject" : "SourceProject");
                 string[] scripts = SchemaCompareTestUtils.GetProjectScripts(projectPath);
-                return new SchemaCompareProjectEndpoint(Path.Combine(projectPath, isProjectTarget ? "TargetProject.sqlproj" : "SourceProject.sqlproj"), scripts, "150");
+                return new SchemaCompareProjectEndpoint(Path.Combine(projectPath, isProjectTarget ? "TargetProject.sqlproj" : "SourceProject.sqlproj"), scripts, "150", DacExtractTarget.ObjectType);
             }
             else
             {