diff --git a/CodeEdit/Features/NavigatorArea/ProjectNavigator/ProjectNavigatorToolbarBottom.swift b/CodeEdit/Features/NavigatorArea/ProjectNavigator/ProjectNavigatorToolbarBottom.swift
index 52cc88a72..cc13f54f5 100644
--- a/CodeEdit/Features/NavigatorArea/ProjectNavigator/ProjectNavigatorToolbarBottom.swift
+++ b/CodeEdit/Features/NavigatorArea/ProjectNavigator/ProjectNavigatorToolbarBottom.swift
@@ -16,6 +16,8 @@ struct ProjectNavigatorToolbarBottom: View {
 
     @EnvironmentObject var workspace: WorkspaceDocument
 
+    @EnvironmentObject var editorManager: EditorManager
+
     @State var filter: String = ""
 
     var body: some View {
@@ -50,21 +52,43 @@ struct ProjectNavigatorToolbarBottom: View {
         }
     }
 
+    /// Retrieves the active tab URL from the underlying editor instance, if theres no
+    /// active tab, fallbacks to the workspace's root directory
+    private func activeTabURL() -> URL {
+        if let selectedTab = editorManager.activeEditor.selectedTab {
+            if selectedTab.isFolder {
+                return selectedTab.url
+            }
+
+            // If the current active tab belongs to a file, pop the filename from
+            // the path URL to retrieve the folder URL
+            let activeTabFileURL = selectedTab.url
+
+            if URLComponents(url: activeTabFileURL, resolvingAgainstBaseURL: false) != nil {
+                var pathComponents = activeTabFileURL.pathComponents
+                pathComponents.removeLast()
+
+                let fileURL = NSURL.fileURL(withPathComponents: pathComponents)! as URL
+                return fileURL
+            }
+        }
+
+        return workspace.workspaceFileManager.unsafelyUnwrapped.folderUrl
+    }
+
     private var addNewFileButton: some View {
         Menu {
             Button("Add File") {
-                guard let folderURL = workspace.workspaceFileManager?.folderUrl,
-                      let root = try? workspace.workspaceFileManager?.getFile(folderURL.path) else { return }
+                let filePathURL = activeTabURL()
+                guard let workspace = workspace.workspaceFileManager?.getFile(filePathURL.path) else { return }
 
-                // TODO: use currently selected file instead of root
-                root.addFile(fileName: "untitled")
+                workspace.addFile(fileName: "untitled")
             }
             Button("Add Folder") {
-                guard let folderURL = workspace.workspaceFileManager?.folderUrl,
-                      let root = try? workspace.workspaceFileManager?.getFile(folderURL.path) else { return }
+                let filePathURL = activeTabURL()
+                guard let workspace = workspace.workspaceFileManager?.getFile(filePathURL.path) else { return }
 
-                // TODO: use currently selected file instead of root
-                root.addFolder(folderName: "untitled")
+                workspace.addFolder(folderName: "untitled")
             }
         } label: {
             Image(systemName: "plus")