diff --git a/src/utils.js b/src/utils.js
index a674bfb3..88e84186 100644
--- a/src/utils.js
+++ b/src/utils.js
@@ -311,6 +311,30 @@ function escapeLocalIdent(localident) {
   );
 }
 
+function resolveFolderTemplate(loaderContext, localIdentName, options) {
+  const { context } = options;
+  let { resourcePath } = loaderContext;
+  const parsed = path.parse(loaderContext.resourcePath);
+
+  if (parsed.dir) {
+    resourcePath = parsed.dir + path.sep;
+  }
+
+  let directory = path
+    .relative(context, `${resourcePath}_`)
+    .replace(/\\/g, "/")
+    .replace(/\.\.(\/)?/g, "_$1");
+  directory = directory.substr(0, directory.length - 1);
+
+  let folder = "";
+
+  if (directory.length > 1) {
+    folder = path.basename(directory);
+  }
+
+  return localIdentName.replace(/\[folder\]/gi, () => folder);
+}
+
 function defaultGetLocalIdent(
   loaderContext,
   localIdentName,
@@ -387,19 +411,33 @@ function defaultGetLocalIdent(
   };
 
   // eslint-disable-next-line no-underscore-dangle
-  let result = loaderContext._compilation.getPath(localIdentName, data);
+  let interpolatedFilename = loaderContext._compilation.getPath(
+    localIdentName,
+    data
+  );
 
   if (options.regExp) {
     const match = loaderContext.resourcePath.match(options.regExp);
 
     if (match) {
       match.forEach((matched, i) => {
-        result = result.replace(new RegExp(`\\[${i}\\]`, "ig"), matched);
+        interpolatedFilename = interpolatedFilename.replace(
+          new RegExp(`\\[${i}\\]`, "ig"),
+          matched
+        );
       });
     }
   }
 
-  return result;
+  if (localIdentName.includes("[folder]")) {
+    interpolatedFilename = resolveFolderTemplate(
+      loaderContext,
+      interpolatedFilename,
+      options
+    );
+  }
+
+  return interpolatedFilename;
 }
 
 function fixedEncodeURIComponent(str) {
diff --git a/test/modules-option.test.js b/test/modules-option.test.js
index d658af16..2e92b094 100644
--- a/test/modules-option.test.js
+++ b/test/modules-option.test.js
@@ -1909,6 +1909,46 @@ describe('"modules" option', () => {
     expect(getErrors(stats)).toMatchSnapshot("errors");
   });
 
+  it("should work with [folder]", async () => {
+    const compiler = getCompiler("./modules/localIdentName/localIdentName.js", {
+      modules: { localIdentName: "[local]-[folder]-[name]" },
+    });
+    const stats = await compile(compiler);
+
+    expect(
+      getModuleSource("./modules/localIdentName/localIdentName.css", stats)
+    ).toMatchSnapshot("module");
+    expect(getExecutedCode("main.bundle.js", compiler, stats)).toMatchSnapshot(
+      "result"
+    );
+    expect(getWarnings(stats)).toMatchSnapshot("warnings");
+    expect(getErrors(stats)).toMatchSnapshot("errors");
+  });
+
+  it("should work with [folder] 2", async () => {
+    const compiler = getCompiler("./modules/localIdentName/localIdentName.js", {
+      modules: {
+        localIdentName: "[local]-[folder][name]",
+        localIdentContext: path.resolve(
+          __dirname,
+          "fixtures",
+          "modules",
+          "localIdentName"
+        ),
+      },
+    });
+    const stats = await compile(compiler);
+
+    expect(
+      getModuleSource("./modules/localIdentName/localIdentName.css", stats)
+    ).toMatchSnapshot("module");
+    expect(getExecutedCode("main.bundle.js", compiler, stats)).toMatchSnapshot(
+      "result"
+    );
+    expect(getWarnings(stats)).toMatchSnapshot("warnings");
+    expect(getErrors(stats)).toMatchSnapshot("errors");
+  });
+
   it('should work and prefer relative for "composes"', async () => {
     const compiler = getCompiler("./modules/prefer-relative/source.js", {
       modules: { mode: "local" },