diff --git a/zeppelin-web/src/app/home/home.controller.js b/zeppelin-web/src/app/home/home.controller.js
index 14f15870e37..63410ce7234 100644
--- a/zeppelin-web/src/app/home/home.controller.js
+++ b/zeppelin-web/src/app/home/home.controller.js
@@ -71,4 +71,9 @@ angular.module('zeppelinWebApp').controller('HomeCtrl', function($scope, noteboo
     websocketMsgSrv.reloadAllNotesFromRepo();
     $scope.isReloadingNotes = true;
   };
+
+  $scope.toggleFolderNode = function(node) {
+    node.hidden = !node.hidden;
+  };
+
 });
diff --git a/zeppelin-web/src/app/home/home.css b/zeppelin-web/src/app/home/home.css
index 281ffb4168f..c37febc5266 100644
--- a/zeppelin-web/src/app/home/home.css
+++ b/zeppelin-web/src/app/home/home.css
@@ -151,6 +151,70 @@ a.navbar-brand:hover {
   font: normal normal normal 14px/1 FontAwesome;
 }
 
+.dropdown-submenu {
+  position: relative;
+}
+
+.dropdown-submenu a {
+  display: block;
+  padding: 3px 20px;
+  clear: both;
+  font-weight: normal;
+  line-height: 1.42857143;
+  color: #333;
+  white-space: nowrap;
+  text-decoration: none;
+}
+
+.dropdown-submenu a:hover {
+  background-color: #f5f5f5;
+}
+
+.dropdown-submenu > .dropdown-menu {
+  top:0;
+  left:100%;
+  margin-top:-6px;
+  margin-left:-1px;
+  -webkit-border-radius:0 6px 6px 6px;
+  -moz-border-radius:0 6px 6px 6px;
+  border-radius:0 6px 6px 6px;
+}
+.dropdown-submenu:hover > .dropdown-menu {
+  display:block;
+}
+/* overwrite the style of the first element of dropdown-menu */
+.dropdown-submenu:hover > .dropdown-menu > li:first-child > a:hover {
+  color: #262626;
+  text-decoration: none;
+  background: #f5f5f5;
+}
+.dropdown-submenu > a:after {
+  display:block;
+  content:" ";
+  float:right;
+  width:0;
+  height:0;
+  border-color:transparent;
+  border-style:solid;
+  border-width:5px 0 5px 5px;
+  border-left-color:#cccccc;
+  margin-top:5px;
+  margin-right:-10px;
+}
+.dropdown-submenu:hover > a:after {
+  border-left-color:#ffffff;
+}
+.dropdown-submenu.pull-left {
+  float:none;
+}
+.dropdown-submenu.pull-left > .dropdown-menu {
+  left:-100%;
+  margin-left:10px;
+  -webkit-border-radius:6px 0 6px 6px;
+  -moz-border-radius:6px 0 6px 6px;
+  border-radius:6px 0 6px 6px;
+}
+
 @media (max-width: 767px) {
   .navbar-inverse .navbar-nav .open .dropdown-menu > li > a {
     color: #D3D3D3;
@@ -199,6 +263,7 @@ a.navbar-brand:hover {
 #notebook-list {
   position: relative;
   overflow: hidden;
+  display: inline;
 }
 
 @media (min-width: 768px) {
diff --git a/zeppelin-web/src/app/home/home.html b/zeppelin-web/src/app/home/home.html
index 71a7a1ad7ad..7255f68914e 100644
--- a/zeppelin-web/src/app/home/home.html
+++ b/zeppelin-web/src/app/home/home.html
@@ -12,6 +12,24 @@
 limitations under the License.
 -->
 
+<script type="text/ng-template" id="notebook_folder_renderer.html">
+  <div ng-if="node.children == null">
+    <a style="text-decoration: none;" href="#/notebook/{{node.id}}">
+      <i style="font-size: 10px;" class="icon-doc"/> {{node.name || 'Note ' + node.id}}
+    </a>
+  </div>
+  <div ng-if="node.children != null">
+    <a style="text-decoration: none; cursor: pointer;" ng-click="toggleFolderNode(node)">
+      <i style="font-size: 10px;" ng-class="node.hidden ? 'icon-folder' : 'icon-folder-alt'" /> {{node.name}}
+    </a>
+    <div ng-if="!node.hidden">
+      <ul style="list-style-type: none; padding-left:15px;">
+        <li ng-repeat="node in node.children" ng-include="'notebook_folder_renderer.html'" />
+      </ul>
+    </div>
+  </div>
+</script>
+
 <div ng-controller="HomeCtrl as home">
   <div ng-show="home.staticHome" class="box width-full home">
     <div class="zeppelin">
@@ -41,10 +59,15 @@ <h5><a href="" data-toggle="modal" data-target="#noteNameModal" style="text-deco
               <i style="font-size: 15px;" class="icon-notebook"></i> Create new note</a></h5>
             <ul id="notebook-names">
               <li class="filter-names" ng-include="'components/filterNoteNames/filter-note-names.html'"></li>
-              <li ng-repeat="note in home.notes.list | filter:query | orderBy:home.arrayOrderingSrv.notebookListOrdering track by $index">
-                <i style="font-size: 10px;" class="icon-doc"></i>
-                <a style="text-decoration: none;" href="#/notebook/{{note.id}}">{{note.name || 'Note ' + note.id}}</a>
-              </li>
+              <div ng-if="!query || query.name === ''">
+                <li ng-repeat="node in home.notes.root.children" ng-include="'notebook_folder_renderer.html'" />
+              </div>
+              <div ng-if="query && query.name !== ''">
+                <li ng-repeat="note in home.notes.flatList | filter:query | orderBy:home.arrayOrderingSrv.notebookListOrdering track by $index">
+                  <i style="font-size: 10px;" class="icon-doc"></i>
+                  <a style="text-decoration: none;" href="#/notebook/{{note.id}}">{{note.name || 'Note ' + note.id}}</a>
+                </li>
+              </div>
             </ul>
           </div>
         </div>
diff --git a/zeppelin-web/src/components/navbar/navbar.html b/zeppelin-web/src/components/navbar/navbar.html
index bdc57901055..272167ae6cb 100644
--- a/zeppelin-web/src/components/navbar/navbar.html
+++ b/zeppelin-web/src/components/navbar/navbar.html
@@ -10,7 +10,19 @@
 WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
 See the License for the specific language governing permissions and
 limitations under the License.
--->
+  -->
+<script type="text/ng-template" id="notebook_list_renderer.html">
+  <a ng-if="note.id" href="#/notebook/{{note.id}}">{{note.name || 'Note ' + note.id}} </a>
+  <li ng-if="!note.id"
+      class="dropdown-submenu">
+    <a tabindex="-1" href="javascript: void(0)">{{note.name}}</a>
+    <ul class="dropdown-menu">
+      <li ng-repeat="note in note.children track by $index" ng-class="{'active' : navbar.isActive(note.id)}" ng-include="'notebook_list_renderer.html'">
+      </li>
+    </ul>
+  </li>
+</script>
+
 <div class="navbar navbar-inverse navbar-fixed-top" style="display: none;" role="navigation" ng-class="{'displayNavBar': !asIframe}">
   <div class="container">
     <div class="navbar-header">
@@ -32,10 +44,7 @@
             <li><a href="" data-toggle="modal" data-target="#noteNameModal"><i class="fa fa-plus"></i> Create new note</a></li>
             <li class="divider"></li>
             <div id="notebook-list" class="scrollbar-container">
-              <li class="filter-names" ng-include="'components/filterNoteNames/filter-note-names.html'"></li>
-              <li ng-repeat="note in navbar.notes.list | filter:query | orderBy:navbar.arrayOrderingSrv.notebookListOrdering track by $index"
-                  ng-class="{'active' : navbar.isActive(note.id)}">
-                <a href="#/notebook/{{note.id}}">{{note.name || 'Note ' + note.id}} </a>
+              <li ng-repeat="note in navbar.notes.root.children track by $index" ng-class="{'active' : navbar.isActive(note.id)}" ng-include="'notebook_list_renderer.html'">
               </li>
             </div>
           </ul>
diff --git a/zeppelin-web/src/components/noteName-create/note-name-dialog.html b/zeppelin-web/src/components/noteName-create/note-name-dialog.html
index 8c0cf9199fb..f0f12a23ded 100644
--- a/zeppelin-web/src/components/noteName-create/note-name-dialog.html
+++ b/zeppelin-web/src/components/noteName-create/note-name-dialog.html
@@ -28,6 +28,7 @@ <h4 class="modal-title" ng-show="notenamectrl.clone">Clone note</h4>
               placeholder="Note name" type="text" class="form-control"
               id="noteName" ng-model="note.notename" ng-enter="notenamectrl.handleNameEnter()">
           </div>
+          Use '/' to create folders. Example: /NoteDirA/Notebook1
         </div>
         <div class="modal-footer">
           <button type="button" id="createNoteButton"
diff --git a/zeppelin-web/src/components/notebookListDataFactory/notebookList.datafactory.js b/zeppelin-web/src/components/notebookListDataFactory/notebookList.datafactory.js
index ae48999b86d..43fd061b6ee 100644
--- a/zeppelin-web/src/components/notebookListDataFactory/notebookList.datafactory.js
+++ b/zeppelin-web/src/components/notebookListDataFactory/notebookList.datafactory.js
@@ -14,13 +14,52 @@
 'use strict';
 
 angular.module('zeppelinWebApp').factory('notebookListDataFactory', function() {
-  var notes = {};
 
-  notes.list = [];
+  var notes = {
+    root: {children: []},
+    flatList: [],
 
-  notes.setNotes = function(notesList) {
-    notes.list = angular.copy(notesList);
+    setNotes: function(notesList) {
+      // a flat list to boost searching
+      notes.flatList = angular.copy(notesList);
+
+      // construct the folder-based tree
+      notes.root = {children: []};
+      _.reduce(notesList, function(root, note) {
+        var noteName = note.name || note.id;
+        var nodes = noteName.match(/([^\\\][^\/]|\\\/)+/g);
+
+        // recursively add nodes
+        addNode(root, nodes, note.id);
+
+        return root;
+      }, notes.root);
+    }
+  };
+
+  var addNode = function(curDir, nodes, noteId) {
+    if (nodes.length === 1) {  // the leaf
+      curDir.children.push({
+        name : nodes[0],
+        id : noteId
+      });
+    } else {  // a folder node
+      var node = nodes.shift();
+      var dir = _.find(curDir.children,
+        function(c) {return c.name === node && c.children !== undefined;});
+      if (dir !== undefined) { // found an existing dir
+        addNode(dir, nodes, noteId);
+      } else {
+        var newDir = {
+          name : node,
+          hidden : true,
+          children : []
+        };
+        curDir.children.push(newDir);
+        addNode(newDir, nodes, noteId);
+      }
+    }
   };
 
   return notes;
-});
\ No newline at end of file
+});
diff --git a/zeppelin-web/test/spec/factory/notebookList.js b/zeppelin-web/test/spec/factory/notebookList.js
new file mode 100644
index 00000000000..ec6786676f5
--- /dev/null
+++ b/zeppelin-web/test/spec/factory/notebookList.js
@@ -0,0 +1,69 @@
+'use strict';
+
+describe('Factory: NotebookList', function() {
+
+  var notebookList;
+
+  beforeEach(function () {
+    module('zeppelinWebApp');
+
+    inject(function ($injector) {
+      notebookList = $injector.get('notebookListDataFactory');
+    });
+  });
+
+  it('should generate both flat list and folder-based list properly', function() {
+    var notesList = [
+      {name: 'A', id: '000001'},
+      {name: 'B', id: '000002'},
+      {id: '000003'}, // notebook without name
+      {name: '/C/CA', id: '000004'},
+      {name: '/C/CB', id: '000005'},
+      {name: '/C/CB/CBA', id: '000006'},  // same name with a dir
+      {name: '/C/CB/CBA', id: '000007'}, // same name with another note
+      {name: 'C///CB//CBB', id: '000008'}
+    ];
+    notebookList.setNotes(notesList);
+
+    var flatList = notebookList.flatList;
+    expect(flatList.length).toBe(8);
+    expect(flatList[0].name).toBe('A');
+    expect(flatList[0].id).toBe('000001');
+    expect(flatList[1].name).toBe('B');
+    expect(flatList[2].name).toBeUndefined();
+    expect(flatList[3].name).toBe('/C/CA');
+    expect(flatList[4].name).toBe('/C/CB');
+    expect(flatList[5].name).toBe('/C/CB/CBA');
+    expect(flatList[6].name).toBe('/C/CB/CBA');
+    expect(flatList[7].name).toBe('C///CB//CBB');
+
+    var folderList = notebookList.root.children;
+    expect(folderList.length).toBe(4);
+    expect(folderList[0].name).toBe('A');
+    expect(folderList[0].id).toBe('000001');
+    expect(folderList[1].name).toBe('B');
+    expect(folderList[2].name).toBe('000003');
+    expect(folderList[3].name).toBe('C');
+    expect(folderList[3].id).toBeUndefined();
+    expect(folderList[3].children.length).toBe(3);
+    expect(folderList[3].children[0].name).toBe('CA');
+    expect(folderList[3].children[0].id).toBe('000004');
+    expect(folderList[3].children[0].children).toBeUndefined();
+    expect(folderList[3].children[1].name).toBe('CB');
+    expect(folderList[3].children[1].id).toBe('000005');
+    expect(folderList[3].children[1].children).toBeUndefined();
+    expect(folderList[3].children[2].name).toBe('CB');
+    expect(folderList[3].children[2].id).toBeUndefined();
+    expect(folderList[3].children[2].children.length).toBe(3);
+    expect(folderList[3].children[2].children[0].name).toBe('CBA');
+    expect(folderList[3].children[2].children[0].id).toBe('000006');
+    expect(folderList[3].children[2].children[0].children).toBeUndefined();
+    expect(folderList[3].children[2].children[1].name).toBe('CBA');
+    expect(folderList[3].children[2].children[1].id).toBe('000007');
+    expect(folderList[3].children[2].children[1].children).toBeUndefined();
+    expect(folderList[3].children[2].children[2].name).toBe('CBB');
+    expect(folderList[3].children[2].children[2].id).toBe('000008');
+    expect(folderList[3].children[2].children[2].children).toBeUndefined();
+  });
+
+});