diff --git a/public/css/backgrounds.css b/public/css/backgrounds.css
index 6d58f0ea1..e08ea31ca 100644
--- a/public/css/backgrounds.css
+++ b/public/css/backgrounds.css
@@ -107,7 +107,8 @@
     opacity: 1;
 }
 
-.bg_example .mobile-only-menu-toggle {
+.bg_example .mobile-only-menu-toggle,
+.bg_folder_tile .mobile-only-menu-toggle {
     display: none;
 }
 
@@ -376,3 +377,169 @@
 #bg_custom_content:not(:empty)~#bg_chat_hint {
     display: none;
 }
+
+.bg_folder_grid.bg_list {
+    display: grid;
+    gap: 5px;
+    width: 100%;
+    grid-template-columns: repeat(calc(var(--bg-thumb-columns, 5) + 2), 1fr);
+    margin-bottom: 10px;
+}
+
+.bg_folder_grid:empty {
+    display: none;
+}
+
+.bg_folder_tile {
+    cursor: pointer;
+    position: relative;
+    overflow: hidden;
+    border-radius: 8px;
+    height: auto;
+    aspect-ratio: 1 / 1;
+    outline: 2px solid var(--SmartThemeBorderColor);
+    outline-offset: -1px;
+    box-shadow: 0 0 7px var(--black50a);
+    display: flex;
+    flex-direction: column;
+    align-items: center;
+    justify-content: center;
+    background-color: var(--SmartThemeBlurTintColor);
+    transition: filter var(--animation-duration) ease;
+}
+
+.bg_folder_tile:hover {
+    filter: brightness(1.1);
+}
+
+.bg_folder_tile_cover {
+    position: absolute;
+    top: 0;
+    left: 0;
+    right: 0;
+    bottom: 0;
+    background-size: cover;
+    background-position: center;
+    border-radius: inherit;
+}
+
+.bg_folder_tile_overlay {
+    position: absolute;
+    bottom: 0;
+    left: 0;
+    right: 0;
+    background: linear-gradient(transparent, rgba(0, 0, 0, 0.85));
+    color: var(--SmartThemeBodyColor);
+    padding: 6px 8px 4px;
+    display: flex;
+    align-items: center;
+    gap: 5px;
+    font-size: 0.85em;
+    font-weight: 600;
+    pointer-events: none;
+    border-radius: 0 0 8px 8px;
+}
+
+.bg_folder_tile_overlay i {
+    font-size: 0.9em;
+    opacity: 0.8;
+}
+
+.bg_folder_tile_name {
+    white-space: nowrap;
+    overflow: hidden;
+    text-overflow: ellipsis;
+}
+
+/* Folder tile action menu */
+.bg_folder_tile .bg_folder_tile_menu {
+    display: flex;
+    position: absolute;
+    top: 2px;
+    right: 2px;
+    background-color: rgba(0, 0, 0, 0.5);
+    border-radius: 5px;
+    padding: 3px;
+    z-index: 3;
+    backdrop-filter: blur(4px);
+    border: 1px solid var(--SmartThemeBorderColor);
+    align-items: center;
+
+    opacity: 0;
+    visibility: hidden;
+    transform: scale(0.9);
+    transform-origin: center;
+    transition: opacity var(--animation-duration) ease-out, visibility var(--animation-duration) ease-out, transform var(--animation-duration) ease-out;
+}
+
+.bg_folder_tile:hover .bg_folder_tile_menu,
+.bg_folder_tile:focus-within .bg_folder_tile_menu {
+    opacity: 1;
+    visibility: visible;
+    transform: scale(1);
+}
+
+.bg_folder_tile .jg-button {
+    display: flex;
+    width: 24px;
+    height: 24px;
+    align-items: center;
+    justify-content: center;
+    color: white;
+    padding: 5px;
+    font-size: 1.1em;
+    border-radius: 5px;
+    transition: background-color var(--animation-duration) ease;
+}
+
+.bg_folder_tile .jg-button:hover {
+    background-color: rgba(255, 255, 255, 0.2);
+}
+
+/* New Folder placeholder tile */
+.bg_new_folder_tile {
+    border: 2px dashed var(--SmartThemeBorderColor);
+    outline: none;
+    color: var(--SmartThemeBodyColor);
+    opacity: 0.6;
+    gap: 6px;
+    font-size: 0.85em;
+    font-weight: 600;
+}
+
+.bg_new_folder_tile:hover {
+    opacity: 1;
+    transform: scale(1.03);
+}
+
+/* Breadcrumb bar */
+.bg_folder_breadcrumb {
+    display: flex;
+    align-items: center;
+    gap: 8px;
+    padding: 5px 0;
+    margin-bottom: 5px;
+}
+
+.bg_current_folder_name {
+    font-weight: 600;
+    font-size: 1em;
+    color: var(--SmartThemeBodyColor);
+    white-space: nowrap;
+    overflow: hidden;
+    text-overflow: ellipsis;
+}
+
+#Backgrounds:not(.in-folder-view) .jg-set-cover {
+    display: none !important;
+}
+
+#Backgrounds.in-folder-view .jg-set-cover {
+    display: flex !important;
+}
+
+/* Hide folder actions on custom (chat-specific) backgrounds */
+.bg_example[custom="true"] .jg-folder,
+.bg_example[custom="true"] .jg-set-cover {
+    display: none !important;
+}
diff --git a/public/css/mobile-styles.css b/public/css/mobile-styles.css
index 01abb6ab5..7e6a6da7b 100644
--- a/public/css/mobile-styles.css
+++ b/public/css/mobile-styles.css
@@ -38,6 +38,56 @@
         grid-template-columns: repeat(var(--bg-thumb-columns, 3), 1fr);
     }
 
+    .bg_folder_grid {
+        grid-template-columns: repeat(var(--bg-thumb-columns, 3), 1fr);
+    }
+
+    .bg_folder_tile .bg_folder_tile_menu {
+        opacity: 0;
+        visibility: hidden;
+        transform: scale(0.9);
+    }
+
+    .bg_folder_tile:hover .bg_folder_tile_menu,
+    .bg_folder_tile:focus-within .bg_folder_tile_menu {
+        display: none;
+    }
+
+    .bg_folder_tile.mobile-menu-open .bg_folder_tile_menu {
+        display: flex;
+        opacity: 1;
+        visibility: visible;
+        transform: scale(1);
+        z-index: 4;
+    }
+
+    .bg_folder_tile.mobile-menu-open .mobile-only-menu-toggle {
+        opacity: 0;
+        pointer-events: none;
+    }
+
+    .bg_folder_tile .mobile-only-menu-toggle {
+        display: flex;
+        align-items: center;
+        justify-content: center;
+        position: absolute;
+        top: 5px;
+        right: 5px;
+        width: 30px;
+        height: 30px;
+        background-color: rgba(0, 0, 0, 0.4);
+        color: white;
+        border-radius: 6px;
+        z-index: 3;
+        cursor: pointer;
+        backdrop-filter: blur(2px);
+    }
+
+    .bg_folder_tile .jg-button {
+        width: 30px;
+        height: 30px;
+    }
+
     .bg_list {
         width: unset;
     }
@@ -102,7 +152,8 @@
     }
 
     #add_background_button_top>span,
-    #auto_background>span {
+    #auto_background>span,
+    #bg_add_folder_button>span {
         display: none;
     }
 
diff --git a/public/index.html b/public/index.html
index fa4aeb690..bd8aab5e5 100644
--- a/public/index.html
+++ b/public/index.html
@@ -5597,6 +5597,10 @@
                             <i class="fa-solid fa-wand-magic"></i>
                             <span data-i18n="Auto-select">Auto-select</span>
                         </div>
+                        <button id="bg_add_folder_button" class="menu_button menu_button_icon" data-i18n="[title]New Folder" title="New Folder">
+                            <i class="fa-solid fa-folder-plus"></i>
+                            <span data-i18n="New Folder">New Folder</span>
+                        </button>
                         <label for="add_bg_button" id="add_background_button_top" class="menu_button menu_button_icon" data-i18n="[title]Add a new background" title="Add a new background">
                             <i class="fa-solid fa-upload"></i>
                             <span data-i18n="Add Background">Add Background</span>
@@ -5630,6 +5634,14 @@
                         </div>
                     </ul>
                     <div id="bg_global_tab" class="bg_tab_panel">
+                        <div id="bg_folder_breadcrumb" class="bg_folder_breadcrumb" style="display:none;">
+                            <button id="bg_back_to_folders" class="menu_button menu_button_icon">
+                                <i class="fa-solid fa-arrow-left"></i>
+                                <span data-i18n="Back">Back</span>
+                            </button>
+                            <span id="bg_current_folder_name" class="bg_current_folder_name"></span>
+                        </div>
+                        <div id="bg_folder_grid" class="bg_list bg_folder_grid"></div>
                         <div id="bg_menu_content" class="bg_list"></div>
                     </div>
                     <div id="bg_chat_tab" class="bg_tab_panel">
@@ -6598,10 +6610,34 @@
                     <div data-action="copy" class="jg-button jg-copy fa-solid fa-file-arrow-up" data-i18n="[title]Copy to global backgrounds" title="Copy to global backgrounds"></div>
                     <div data-action="edit" class="jg-button jg-edit fa-solid fa-pen-to-square fa-fw pointer" data-i18n="[title]Rename Background" title="Rename Background"></div>
                     <div data-action="delete" class="jg-button jg-delete fa-solid fa-trash-can fa-fw pointer" data-i18n="[title]Delete Background" title="Delete Background"></div>
+                    <div data-action="folder" class="jg-button jg-folder fa-solid fa-folder fa-fw pointer" data-i18n="[title]Add to folder" title="Add to folder"></div>
+                    <div data-action="set-cover" class="jg-button jg-set-cover fa-solid fa-image fa-fw pointer" data-i18n="[title]Set as folder cover" title="Set as folder cover"></div>
                 </div>
                 <div class="BGSampleTitle"></div>
             </div>
         </div>
+        <div id="bg_folder_tile_template" class="template_element">
+            <div class="bg_folder_tile" data-folder-id="">
+                <div class="bg_folder_tile_cover"></div>
+                <div class="bg_folder_tile_overlay">
+                    <i class="fa-solid fa-folder"></i>
+                    <span class="bg_folder_tile_name"></span>
+                </div>
+                <div class="mobile-only-menu-toggle">
+                    <i class="fa-solid fa-ellipsis-vertical"></i>
+                </div>
+                <div class="bg_folder_tile_menu jg-menu">
+                    <div data-action="rename-folder" class="jg-button fa-solid fa-pen-to-square fa-fw pointer" data-i18n="[title]Rename folder" title="Rename folder"></div>
+                    <div data-action="delete-folder" class="jg-button fa-solid fa-trash-can fa-fw pointer" data-i18n="[title]Delete folder" title="Delete folder"></div>
+                </div>
+            </div>
+        </div>
+        <div id="bg_new_folder_template" class="template_element">
+            <div class="bg_folder_tile bg_new_folder_tile">
+                <i class="fa-solid fa-folder-plus fa-2x"></i>
+                <span data-i18n="New Folder">New Folder</span>
+            </div>
+        </div>
         <!-- templates for JS to reuse when needed -->
         <div id="character_world_template" class="template_element">
             <div class="character_world range-block flexFlowColumn flex-container">
diff --git a/public/scripts/backgrounds.js b/public/scripts/backgrounds.js
index 3253d7ee5..5b0158a64 100644
--- a/public/scripts/backgrounds.js
+++ b/public/scripts/backgrounds.js
@@ -6,7 +6,7 @@ import { SlashCommandParser } from './slash-commands/SlashCommandParser.js';
 import { createThumbnail, flashHighlight, getBase64Async, stringFormat, debounce, setupScrollToTop, saveBase64AsFile, getFileExtension, sortIgnoreCaseAndAccents } from './utils.js';
 import { debounce_timeout } from './constants.js';
 import { t } from './i18n.js';
-import { Popup } from './popup.js';
+import { callGenericPopup, Popup, POPUP_TYPE } from './popup.js';
 import { groups, selected_group } from './group-chats.js';
 import { humanizedDateTime } from './RossAscends-mods.js';
 import { deleteMediaFromServer } from './chats.js';
@@ -14,6 +14,13 @@ import { deleteMediaFromServer } from './chats.js';
 const BG_METADATA_KEY = 'custom_background';
 const LIST_METADATA_KEY = 'chat_backgrounds';
 
+/** @type {Array<{id: string, name: string, thumbnailFile: string}>} */
+let folderList = [];
+/** @type {Object.<string, string[]>} filename → folderIds */
+let imageFolderMap = {};
+/** @type {string|null} Currently active folder drill-in, or null for root */
+let activeFolderId = null;
+
 // A single transparent PNG pixel used as a placeholder for errored backgrounds
 const PNG_PIXEL = 'iVBORw0KGgoAAAANSUhEUgAAAAEAAAABCAQAAAC1HAwCAAAAC0lEQVR42mNkYAAAAAYAAjCB0C8AAAAASUVORK5CYII=';
 const PNG_PIXEL_BLOB = new Blob([Uint8Array.from(atob(PNG_PIXEL), c => c.charCodeAt(0))], { type: 'image/png' });
@@ -170,7 +177,7 @@ function createThumbnailElement(imageData) {
 
     const url = generateUrlParameter(bg, isCustom);
     const title = isCustom ? bg.split('/').pop() : bg;
-    const friendlyTitle = title.slice(0, title.lastIndexOf('.'));
+    const friendlyTitle = String(title || '').slice(0, title.lastIndexOf('.'));
 
     thumbnail.attr('title', title);
     thumbnail.attr('bgfile', bg);
@@ -278,6 +285,17 @@ export function getBackgroundPath(fileUrl) {
     return `backgrounds/${encodeURIComponent(fileUrl)}`;
 }
 
+/**
+ * Gets the raw server-side relative path for a background image (no URL encoding).
+ * Used when communicating paths to the API (stored as plain strings in metadata).
+ * @param {string} file File name of the background image
+ * @returns {string} Raw relative path, e.g. "backgrounds/my file.jpg"
+ */
+function getBackgroundRelativePath(file) {
+    return `backgrounds/${file}`;
+}
+
+
 function highlightLockedBackground() {
     $('.bg_example.locked-background').removeClass('locked-background');
 
@@ -553,6 +571,24 @@ async function onDeleteBackgroundClick(e) {
             }
         }
 
+        // Remove from local image list so it doesn't reappear on re-render
+        const deletedBg = bgToDelete.attr('bgfile');
+        if (deletedBg) {
+            const cachedIdx = cachedSystemBackgrounds.findIndex(img => img.filename === deletedBg);
+            if (cachedIdx !== -1) cachedSystemBackgrounds.splice(cachedIdx, 1);
+
+            // Update folder map and clear folder thumbnail if it referenced this image
+            if (imageFolderMap[deletedBg]) {
+                delete imageFolderMap[deletedBg];
+            }
+            for (const folder of folderList) {
+                if (folder.thumbnailFile === deletedBg) {
+                    folder.thumbnailFile = '';
+                }
+            }
+            renderFolderGrid();
+        }
+
         bgToDelete.remove();
 
         if (url === chat_metadata[BG_METADATA_KEY]) {
@@ -664,9 +700,14 @@ export async function getBackgrounds() {
         const { images, config } = await response.json();
         Object.assign(THUMBNAIL_CONFIG, config);
         cachedSystemBackgrounds = images;
+
+        // Load folders first so getFilteredImages() works correctly in folder view
+        await loadFolders();
+
         await preloadImageMetadata();
 
-        renderSystemBackgrounds(images);
+        // Render only filtered images if inside a folder, otherwise all
+        renderSystemBackgrounds(getFilteredImages());
         highlightSelectedBackground();
     }
 }
@@ -696,6 +737,389 @@ async function preloadImageMetadata() {
     }
 }
 
+/**
+ * Loads folder data from the server (separate from image loading).
+ */
+async function loadFolders() {
+    try {
+        const response = await fetch('/api/backgrounds/folders', {
+            method: 'POST',
+            headers: getRequestHeaders(),
+            body: JSON.stringify({}),
+        });
+        if (response.ok) {
+            const data = await response.json();
+            folderList = data.folders || [];
+            imageFolderMap = data.imageFolderMap || {};
+
+            // Auto-assign thumbnail for folders that don't have one, then persist
+            const allImages = cachedSystemBackgrounds.map(img => img.filename);
+            /** @type {{id: string, thumbnailFile: string}[]} */
+            const thumbnailUpdates = [];
+            for (const folder of folderList) {
+                if (!folder.thumbnailFile) {
+                    const firstImage = allImages.find(img => {
+                        const fids = imageFolderMap[img];
+                        return fids && fids.includes(folder.id);
+                    });
+                    if (firstImage) {
+                        folder.thumbnailFile = firstImage;
+                        thumbnailUpdates.push({ id: folder.id, thumbnailFile: firstImage });
+                    }
+                }
+            }
+            if (thumbnailUpdates.length > 0) {
+                await fetch('/api/image-metadata/folders/set-thumbnails', {
+                    method: 'POST',
+                    headers: getRequestHeaders(),
+                    body: JSON.stringify({ updates: thumbnailUpdates }),
+                }).catch(err => console.debug('Auto-thumbnail save failed:', err));
+            }
+
+            renderFolderGrid();
+        }
+    } catch (error) {
+        console.error('Error loading folders:', error);
+    }
+}
+
+/**
+ * Renders the folder grid inside #bg_folder_grid.
+ */
+function renderFolderGrid() {
+    const container = $('#bg_folder_grid');
+    container.empty();
+
+    if (folderList.length === 0 && !activeFolderId) {
+        return;
+    }
+
+    for (const folder of folderList) {
+        const tile = createFolderTileElement(folder);
+        container.append(tile);
+    }
+}
+
+/**
+ * Creates a single folder tile DOM element.
+ * @param {{id: string, name: string, thumbnailFile: string}} folder
+ * @returns {HTMLElement}
+ */
+function createFolderTileElement(folder) {
+    const tile = $('#bg_folder_tile_template .bg_folder_tile').clone();
+    tile.attr('data-folder-id', folder.id);
+    tile.find('.bg_folder_tile_name').text(folder.name);
+
+    // Set cover image (async, update when resolved)
+    getFolderCoverUrl(folder).then(coverUrl => {
+        if (coverUrl) {
+            tile.find('.bg_folder_tile_cover').css('background-image', `url("${coverUrl}")`);
+        }
+    });
+
+    return tile.get(0);
+}
+
+/**
+ * Gets the cover image URL for a folder.
+ * Uses thumbnailFile if set, otherwise falls back to the first image in the folder.
+ * @param {{id: string, name: string, thumbnailFile: string}} folder
+ * @returns {Promise<string|null>}
+ */
+async function getFolderCoverUrl(folder) {
+    const file = folder.thumbnailFile || cachedSystemBackgrounds.find(img => {
+        const fids = imageFolderMap[img.filename];
+        return fids && fids.includes(folder.id);
+    })?.filename;
+    if (!file) return null;
+
+    if (isAnimatedBackgroundExtension(file) && !background_settings.animation) {
+        return getThumbnailFromStorage(file, false);
+    }
+    return getThumbnailUrl('bg', file);
+}
+
+/**
+ * Gets images filtered by the active folder.
+ * @returns {Array<{filename: string, isAnimated: boolean}>}
+ */
+function getFilteredImages() {
+    if (!activeFolderId) return cachedSystemBackgrounds;
+    return cachedSystemBackgrounds.filter(img => {
+        const fids = imageFolderMap[img.filename];
+        return fids && fids.includes(activeFolderId);
+    });
+}
+
+/**
+ * Drills into a folder — hides folder grid, shows breadcrumb, filters images.
+ * @param {string} folderId
+ */
+function onFolderDrillIn(folderId) {
+    const folder = folderList.find(f => f.id === folderId);
+    if (!folder) return;
+
+    activeFolderId = folderId;
+    $('#Backgrounds').addClass('in-folder-view');
+
+    // Hide folder grid, show breadcrumb
+    $('#bg_folder_grid').hide();
+    $('#bg_folder_breadcrumb').show();
+    $('#bg_current_folder_name').text(folder.name);
+
+    // Render only this folder's images
+    renderSystemBackgrounds(getFilteredImages());
+    highlightSelectedBackground();
+}
+
+/**
+ * Returns to the root folder overview.
+ */
+function onBackToFolders() {
+    activeFolderId = null;
+    $('#Backgrounds').removeClass('in-folder-view');
+
+    // Show folder grid, hide breadcrumb
+    $('#bg_folder_grid').show();
+    $('#bg_folder_breadcrumb').hide();
+    $('#bg_current_folder_name').text('');
+
+    // Show all images
+    renderSystemBackgrounds(getFilteredImages());
+    highlightSelectedBackground();
+}
+
+/**
+ * Creates a new folder via API.
+ */
+async function onCreateFolder() {
+    const currentTab = getActiveBackgroundTab();
+    if (currentTab !== BG_SOURCES.GLOBAL) {
+        toastr.warning(t`Folders can only be created in the Global tab`);
+        return;
+    }
+
+    const name = await Popup.show.input(t`Enter folder name:`);
+    if (!name || !name.trim()) return;
+
+    try {
+        const response = await fetch('/api/image-metadata/folders/create', {
+            method: 'POST',
+            headers: getRequestHeaders(),
+            body: JSON.stringify({ name: name.trim() }),
+        });
+        if (response.ok) {
+            const folder = await response.json();
+            folderList.push(folder);
+            renderFolderGrid();
+            toastr.success(t`Folder created: ${folder.name}`);
+        }
+    } catch (error) {
+        console.error('Error creating folder:', error);
+        toastr.error(t`Failed to create folder`);
+    }
+}
+
+/**
+ * Renames a folder via API.
+ * @param {string} folderId
+ */
+async function onRenameFolder(folderId) {
+    const folder = folderList.find(f => f.id === folderId);
+    if (!folder) return;
+
+    const newName = await Popup.show.input(t`Enter new folder name:`, null, folder.name);
+    if (!newName || !newName.trim() || newName.trim() === folder.name) return;
+
+    try {
+        const response = await fetch('/api/image-metadata/folders/update', {
+            method: 'POST',
+            headers: getRequestHeaders(),
+            body: JSON.stringify({ id: folderId, name: newName.trim() }),
+        });
+        if (response.ok) {
+            folder.name = newName.trim();
+            renderFolderGrid();
+            toastr.success(t`Folder renamed`);
+        }
+    } catch (error) {
+        console.error('Error renaming folder:', error);
+        toastr.error(t`Failed to rename folder`);
+    }
+}
+
+/**
+ * Deletes a folder via API.
+ * @param {string} folderId
+ */
+async function onDeleteFolder(folderId) {
+    const folder = folderList.find(f => f.id === folderId);
+    if (!folder) return;
+
+    const confirm = await Popup.show.confirm(t`Delete folder "${folder.name}"?`, t`Images will not be deleted, only the folder grouping.`);
+    if (!confirm) return;
+
+    try {
+        const response = await fetch('/api/image-metadata/folders/delete', {
+            method: 'POST',
+            headers: getRequestHeaders(),
+            body: JSON.stringify({ id: folderId }),
+        });
+        if (response.ok) {
+            folderList = folderList.filter(f => f.id !== folderId);
+            // Clean imageFolderMap
+            for (const fids of Object.values(imageFolderMap)) {
+                const idx = fids.indexOf(folderId);
+                if (idx !== -1) fids.splice(idx, 1);
+            }
+            // If we were inside this folder, go back
+            if (activeFolderId === folderId) {
+                onBackToFolders();
+            }
+            renderFolderGrid();
+            toastr.success(t`Folder deleted`);
+        }
+    } catch (error) {
+        console.error('Error deleting folder:', error);
+        toastr.error(t`Failed to delete folder`);
+    }
+}
+
+/**
+ * Shows a folder assignment popup for an image.
+ * @param {string} bgFile - The background filename
+ */
+async function onAssignToFolder(bgFile) {
+    if (folderList.length === 0) {
+        toastr.info(t`Create a folder first`);
+        return;
+    }
+
+    const currentFolderIds = imageFolderMap[bgFile] || [];
+
+    // Build checkbox inputs for Popup using DOM construction (avoids HTML injection)
+    const contentEl = document.createElement('div');
+    const heading = document.createElement('h3');
+    heading.textContent = t`Assign to folders`;
+    contentEl.appendChild(heading);
+
+    for (const f of folderList) {
+        const label = document.createElement('label');
+        label.className = 'checkbox_label flexGap5';
+        label.style.margin = '4px 0';
+
+        const checkbox = document.createElement('input');
+        checkbox.type = 'checkbox';
+        checkbox.dataset.folderId = f.id;
+        checkbox.checked = currentFolderIds.includes(f.id);
+
+        const span = document.createElement('span');
+        span.textContent = f.name;
+
+        label.appendChild(checkbox);
+        label.appendChild(span);
+        contentEl.appendChild(label);
+    }
+
+    const content = $(contentEl);
+
+    const result = await callGenericPopup(content, POPUP_TYPE.CONFIRM, '', { okButton: t`Save`, cancelButton: t`Cancel` });
+    if (!result) return;
+
+    // Determine which folders were toggled on/off
+    const toAssign = [];
+    const toUnassign = [];
+    content.find('input[type="checkbox"]').each(function () {
+        const fid = $(this).data('folder-id');
+        const isChecked = $(this).prop('checked');
+        const wasChecked = currentFolderIds.includes(fid);
+        if (isChecked && !wasChecked) toAssign.push(fid);
+        if (!isChecked && wasChecked) toUnassign.push(fid);
+    });
+
+    const relativePath = getBackgroundRelativePath(bgFile);
+
+    try {
+        for (const fid of toAssign) {
+            const resp = await fetch('/api/image-metadata/folders/assign', {
+                method: 'POST',
+                headers: getRequestHeaders(),
+                body: JSON.stringify({ id: fid, paths: [relativePath] }),
+            });
+            if (!resp.ok) throw new Error(`Assign to folder ${fid} failed: ${resp.status}`);
+        }
+        for (const fid of toUnassign) {
+            const resp = await fetch('/api/image-metadata/folders/unassign', {
+                method: 'POST',
+                headers: getRequestHeaders(),
+                body: JSON.stringify({ id: fid, paths: [relativePath] }),
+            });
+            if (!resp.ok) throw new Error(`Unassign from folder ${fid} failed: ${resp.status}`);
+        }
+
+        // Update local state
+        const newFolderIds = folderList
+            .filter(f => {
+                const wasIn = currentFolderIds.includes(f.id);
+                if (toAssign.includes(f.id)) return true;
+                if (toUnassign.includes(f.id)) return false;
+                return wasIn;
+            })
+            .map(f => f.id);
+
+        if (newFolderIds.length > 0) {
+            imageFolderMap[bgFile] = newFolderIds;
+        } else {
+            delete imageFolderMap[bgFile];
+        }
+
+        renderFolderGrid();
+
+        // Re-render filtered image list if currently inside a folder view
+        if (activeFolderId) {
+            renderSystemBackgrounds(getFilteredImages());
+            highlightSelectedBackground();
+        }
+
+        toastr.success(t`Folder assignment updated`);
+    } catch (error) {
+        console.error('Error assigning to folder:', error);
+        toastr.error(t`Failed to update folder assignment`);
+    }
+}
+
+/**
+ * Sets an image as the folder cover.
+ * @param {string} bgFile - The background filename
+ */
+async function onSetFolderCover(bgFile) {
+    if (!activeFolderId) return;
+
+    try {
+        const response = await fetch('/api/image-metadata/folders/update', {
+            method: 'POST',
+            headers: getRequestHeaders(),
+            body: JSON.stringify({ id: activeFolderId, thumbnailFile: bgFile }),
+        });
+        if (response.ok) {
+            const folder = folderList.find(f => f.id === activeFolderId);
+            if (folder) {
+                folder.thumbnailFile = bgFile;
+                // Update the DOM tile cover image
+                const coverUrl = await getFolderCoverUrl(folder);
+                if (coverUrl) {
+                    $(`.bg_folder_tile[data-folder-id="${folder.id}"] .bg_folder_tile_cover`)
+                        .css('background-image', `url('${coverUrl}')`);
+                }
+            }
+            toastr.success(t`Folder cover updated`);
+        }
+    } catch (error) {
+        console.error('Error setting folder cover:', error);
+        toastr.error(t`Failed to set folder cover`);
+    }
+}
+
 function activateLazyLoader() {
     // Disconnect previous observer to prevent memory leaks
     if (lazyLoadObserver) {
@@ -1001,6 +1425,21 @@ function onBackgroundFilterInput() {
         const hasMatch = title.toLowerCase().includes(filterValue);
         $bg.toggle(hasMatch);
     });
+
+    // Show/hide folder tiles based on whether folder name matches the filter
+    if (!activeFolderId) {
+        $('#bg_folder_grid .bg_folder_tile').each(function () {
+            const $tile = $(this);
+            const folderId = $tile.attr('data-folder-id');
+            if (!folderId || !filterValue) {
+                $tile.show();
+                return;
+            }
+            const folder = folderList.find(f => f.id === folderId);
+            const folderName = folder ? folder.name.toLowerCase() : '';
+            $tile.toggle(folderName.includes(filterValue));
+        });
+    }
 }
 
 const debouncedOnBackgroundFilterInput = debounce(onBackgroundFilterInput, debounce_timeout.standard);
@@ -1017,6 +1456,41 @@ export function initBackgrounds() {
     eventSource.on(event_types.CHAT_CHANGED, onChatChanged);
     eventSource.on(event_types.FORCE_SET_BACKGROUND, forceSetBackground);
 
+    // Folder event handlers
+    $(document)
+        .on('click', '.bg_folder_tile:not(.bg_new_folder_tile)', function (e) {
+            if ($(e.target).closest('.jg-button').length) return; // let button handler run
+            const folderId = $(this).attr('data-folder-id');
+            if (folderId) onFolderDrillIn(folderId);
+        })
+        .on('click', '#bg_add_folder_button', function () {
+            onCreateFolder();
+        })
+        .on('click', '#bg_back_to_folders', function () {
+            onBackToFolders();
+        })
+        .on('click', '.bg_folder_tile [data-action="rename-folder"]', function (e) {
+            e.stopPropagation();
+            const folderId = $(this).closest('.bg_folder_tile').attr('data-folder-id');
+            if (folderId) onRenameFolder(folderId);
+        })
+        .on('click', '.bg_folder_tile [data-action="delete-folder"]', function (e) {
+            e.stopPropagation();
+            const folderId = $(this).closest('.bg_folder_tile').attr('data-folder-id');
+            if (folderId) onDeleteFolder(folderId);
+        })
+        .on('click', '.bg_folder_tile .mobile-only-menu-toggle', function (e) {
+            e.stopPropagation();
+            const $context = $(this).closest('.bg_folder_tile');
+            const wasOpen = $context.hasClass('mobile-menu-open');
+            // Close all other open menus before opening a new one.
+            $('.bg_folder_tile.mobile-menu-open').removeClass('mobile-menu-open');
+            $('.bg_example.mobile-menu-open').removeClass('mobile-menu-open');
+            if (!wasOpen) {
+                $context.addClass('mobile-menu-open');
+            }
+        });
+
     $(document)
         .off('click', '.bg_example').on('click', '.bg_example', onSelectBackgroundClick)
         .off('click', '.bg_example .mobile-only-menu-toggle').on('click', '.bg_example .mobile-only-menu-toggle', function (e) {
@@ -1025,6 +1499,7 @@ export function initBackgrounds() {
             const wasOpen = $context.hasClass('mobile-menu-open');
             // Close all other open menus before opening a new one.
             $('.bg_example.mobile-menu-open').removeClass('mobile-menu-open');
+            $('.bg_folder_tile.mobile-menu-open').removeClass('mobile-menu-open');
             if (!wasOpen) {
                 $context.addClass('mobile-menu-open');
             }
@@ -1054,6 +1529,20 @@ export function initBackgrounds() {
                 case 'copy':
                     onCopyToSystemBackgroundClick.call(this, e.originalEvent);
                     break;
+                case 'folder': {
+                    const bgEl = $(this).closest('.bg_example');
+                    if (bgEl.attr('custom') === 'true') break; // Only system backgrounds
+                    const bgFile = bgEl.attr('bgfile');
+                    if (bgFile) onAssignToFolder(bgFile);
+                    break;
+                }
+                case 'set-cover': {
+                    const bgEl = $(this).closest('.bg_example');
+                    if (bgEl.attr('custom') === 'true') break; // Only system backgrounds
+                    const bgFile = bgEl.attr('bgfile');
+                    if (bgFile) onSetFolderCover(bgFile);
+                    break;
+                }
             }
         });
 
@@ -1069,8 +1558,8 @@ export function initBackgrounds() {
     $('#bg-sort').on('change', function () {
         background_settings.sortOrder = String($(this).val());
         saveSettingsDebounced();
-        // Re-render both galleries with new sort order
-        renderSystemBackgrounds(cachedSystemBackgrounds);
+        // Re-render both galleries with new sort order (respecting active folder filter)
+        renderSystemBackgrounds(getFilteredImages());
         renderChatBackgrounds();
         highlightSelectedBackground();
         highlightLockedBackground();
diff --git a/src/endpoints/backgrounds.js b/src/endpoints/backgrounds.js
index ee82f80da..aad393cb6 100644
--- a/src/endpoints/backgrounds.js
+++ b/src/endpoints/backgrounds.js
@@ -5,7 +5,7 @@ import express from 'express';
 import sanitize from 'sanitize-filename';
 
 import { invalidateThumbnail } from './thumbnails.js';
-import { getOrGenerateMetadataBatch, removeMetadata, renameMetadata, thumbnailDimensions } from './image-metadata.js';
+import { thumbnailDimensions, readMetadataIndex, renameMetadata, removeMetadata, getOrGenerateMetadataBatch } from './image-metadata.js';
 import { getImages } from '../util.js';
 import { getFileNameValidationFunction } from '../middleware/validateFileName.js';
 
@@ -37,6 +37,34 @@ router.post('/all', async function (request, response) {
     }
 });
 
+/**
+ * POST /api/backgrounds/folders
+ * Returns folders and per-image folderIds from the metadata index.
+ * Loaded separately from /all to avoid blocking image rendering.
+ */
+router.post('/folders', async function (request, response) {
+    try {
+        const index = await readMetadataIndex(request.user.directories.root);
+        const folders = index.folders || [];
+
+        // Build a slim map of image → folderIds for the frontend
+        /** @type {Object.<string, string[]>} */
+        const imageFolderMap = {};
+        for (const [relativePath, meta] of Object.entries(index.images)) {
+            if (Array.isArray(meta.folderIds) && meta.folderIds.length > 0) {
+                // Strip the directory prefix to get just the filename
+                const filename = relativePath.split('/').pop() || relativePath;
+                imageFolderMap[filename] = meta.folderIds;
+            }
+        }
+
+        response.json({ folders, imageFolderMap });
+    } catch (error) {
+        console.error('[Backgrounds] Folders endpoint error:', error);
+        response.status(500).json({ error: 'Internal server error.' });
+    }
+});
+
 router.post('/delete', getFileNameValidationFunction('bg'), async function (request, response) {
     try {
         if (!request.body) return response.sendStatus(400);
@@ -110,7 +138,6 @@ router.post('/upload', async function (request, response) {
 
         const img_path = path.join(request.file.destination, request.file.filename);
         const filename = sanitize(request.file.originalname);
-
         fs.copyFileSync(img_path, path.join(request.user.directories.backgrounds, filename));
         fs.unlinkSync(img_path);
         invalidateThumbnail(request.user.directories, 'bg', filename);
diff --git a/src/endpoints/image-metadata.js b/src/endpoints/image-metadata.js
index 59cfb4cbe..1792b76cd 100644
--- a/src/endpoints/image-metadata.js
+++ b/src/endpoints/image-metadata.js
@@ -10,19 +10,19 @@ import { imageSize } from 'image-size';
 import writeFileAtomic from 'write-file-atomic';
 import express from 'express';
 import { Jimp } from '../jimp.js';
-import { getConfigValue, isPathUnderParent } from '../util.js';
+import { getConfigValue, isPathUnderParent, uuidv4 } from '../util.js';
 
 export const METADATA_FILE = 'image-metadata.json';
 
 /**
  * @typedef {Object} ImageMetadata
- * @property {string} hash - SHA-256 hash of the image file.
- * @property {number} aspectRatio - Aspect ratio (width / height) of the image.
- * @property {boolean} isAnimated - Whether the image is animated.
- * @property {string} dominantColor - Dominant color in hex format (e.g., '#RRGGBB').
+ * @property {string} [hash] - SHA-256 hash of the image file.
+ * @property {number} [aspectRatio] - Aspect ratio (width / height) of the image.
+ * @property {boolean} [isAnimated] - Whether the image is animated.
+ * @property {string} [dominantColor] - Dominant color in hex format (e.g., '#RRGGBB').
  * @property {string[]} folderIds - Array of virtual folder IDs the image belongs to.
- * @property {number} addedTimestamp - Timestamp when the image was added.
- * @property {number} thumbnailResolution - Thumbnail resolution (width * height) for cache invalidation.
+ * @property {number} [addedTimestamp] - Timestamp when the image was added.
+ * @property {number} [thumbnailResolution] - Thumbnail resolution (width * height) for cache invalidation.
  * @property {number} [mtime] - File modification time for cache invalidation (internal use).
  */
 
@@ -255,6 +255,17 @@ export async function removeMetadata(userDataRoot, relativePath) {
     const index = await readMetadataIndex(userDataRoot);
     if (index.images[posixPath]) {
         delete index.images[posixPath];
+
+        // Clear any folder thumbnailFile references that point to the deleted file
+        const deletedFileName = path.posix.basename(posixPath);
+        if (Array.isArray(index.folders)) {
+            for (const folder of index.folders) {
+                if (folder.thumbnailFile === deletedFileName) {
+                    folder.thumbnailFile = '';
+                }
+            }
+        }
+
         await writeMetadataIndex(userDataRoot, index);
     }
 }
@@ -278,6 +289,18 @@ export async function renameMetadata(userDataRoot, oldRelativePath, newRelativeP
 
     delete index.images[posixOldPath];
     index.images[posixNewPath] = data;
+
+    // Update any folder thumbnailFile references that point to the old filename
+    const oldFileName = path.posix.basename(posixOldPath);
+    const newFileName = path.posix.basename(posixNewPath);
+    if (oldFileName !== newFileName && Array.isArray(index.folders)) {
+        for (const folder of index.folders) {
+            if (folder.thumbnailFile === oldFileName) {
+                folder.thumbnailFile = newFileName;
+            }
+        }
+    }
+
     await writeMetadataIndex(userDataRoot, index);
 
     return data;
@@ -319,9 +342,279 @@ export async function cleanupOrphanedMetadata(userDataRoot) {
     return orphanedPaths;
 }
 
+/**
+ * Creates a new virtual folder.
+ * @param {string} userDataRoot
+ * @param {string} name
+ * @returns {Promise<{id: string, name: string, thumbnailFile: string}>}
+ */
+export async function createFolder(userDataRoot, name) {
+    const index = await readMetadataIndex(userDataRoot);
+    const id = uuidv4();
+    const folder = { id, name, thumbnailFile: '' };
+    index.folders.push(folder);
+    await writeMetadataIndex(userDataRoot, index);
+    return folder;
+}
+
+/**
+ * Sets thumbnail files for multiple folders in a single atomic read-modify-write.
+ * Folders not found in the index are silently skipped.
+ * @param {string} userDataRoot
+ * @param {{id: string, thumbnailFile: string}[]} updates
+ * @returns {Promise<void>}
+ */
+export async function setFolderThumbnailsBatch(userDataRoot, updates) {
+    const index = await readMetadataIndex(userDataRoot);
+    for (const { id, thumbnailFile } of updates) {
+        const folder = index.folders.find(f => f.id === id);
+        if (folder) {
+            folder.thumbnailFile = thumbnailFile;
+        }
+    }
+    await writeMetadataIndex(userDataRoot, index);
+}
+
+/**
+ * Renames or updates a virtual folder.
+ * @param {string} userDataRoot
+ * @param {string} folderId
+ * @param {{name?: string, thumbnailFile?: string}} updates
+ * @returns {Promise<{id: string, name: string, thumbnailFile: string}>}
+ */
+export async function updateFolder(userDataRoot, folderId, updates) {
+    const index = await readMetadataIndex(userDataRoot);
+    const folder = index.folders.find(f => f.id === folderId);
+    if (!folder) throw new Error(`Folder '${folderId}' not found.`);
+    if (updates.name !== undefined) folder.name = updates.name;
+    if (updates.thumbnailFile !== undefined) folder.thumbnailFile = updates.thumbnailFile;
+    await writeMetadataIndex(userDataRoot, index);
+    return folder;
+}
+
+/**
+ * Deletes a virtual folder and removes its ID from all images.
+ * @param {string} userDataRoot
+ * @param {string} folderId
+ * @returns {Promise<void>}
+ */
+export async function deleteFolder(userDataRoot, folderId) {
+    const index = await readMetadataIndex(userDataRoot);
+    const idx = index.folders.findIndex(f => f.id === folderId);
+    if (idx === -1) throw new Error(`Folder '${folderId}' not found.`);
+    index.folders.splice(idx, 1);
+    // Remove folderId from all images
+    for (const meta of Object.values(index.images)) {
+        if (Array.isArray(meta.folderIds)) {
+            const fi = meta.folderIds.indexOf(folderId);
+            if (fi !== -1) meta.folderIds.splice(fi, 1);
+        }
+    }
+    await writeMetadataIndex(userDataRoot, index);
+}
+
+/**
+ * Assigns images to a folder.
+ * @param {string} userDataRoot
+ * @param {string} folderId
+ * @param {string[]} relativePaths
+ * @returns {Promise<void>}
+ */
+export async function assignImagesToFolder(userDataRoot, folderId, relativePaths) {
+    const index = await readMetadataIndex(userDataRoot);
+    if (!index.folders.some(f => f.id === folderId)) {
+        throw new Error(`Folder '${folderId}' not found.`);
+    }
+    for (const rp of relativePaths) {
+        const posixPath = rp.replaceAll(path.sep, path.posix.sep);
+
+        // Validate: must be a backgrounds/ path, and no path-traversal segments
+        const normalized = path.posix.normalize(posixPath);
+        if (!normalized.startsWith('backgrounds/') || normalized.split('/').some(seg => seg === '..')) {
+            throw new Error(`Invalid background path: '${posixPath}'`);
+        }
+
+        // Validate: skip silently on missing files
+        const absPath = path.join(userDataRoot, normalized);
+        try {
+            await fs.access(absPath);
+        } catch {
+            console.warn(`[ImageMetadata] Skipping missing background file: '${posixPath}'`);
+            continue;
+        }
+
+        let meta = index.images[normalized];
+        if (!meta) {
+            // Create a stub entry so folderIds can be stored even before full metadata generation
+            meta = { folderIds: [] };
+            index.images[normalized] = meta;
+        }
+        if (!Array.isArray(meta.folderIds)) meta.folderIds = [];
+        if (!meta.folderIds.includes(folderId)) {
+            meta.folderIds.push(folderId);
+        }
+    }
+    await writeMetadataIndex(userDataRoot, index);
+}
+
+/**
+ * Unassigns images from a folder.
+ * @param {string} userDataRoot
+ * @param {string} folderId
+ * @param {string[]} relativePaths
+ * @returns {Promise<void>}
+ */
+export async function unassignImagesFromFolder(userDataRoot, folderId, relativePaths) {
+    const index = await readMetadataIndex(userDataRoot);
+    for (const rp of relativePaths) {
+        const posixPath = rp.replaceAll(path.sep, path.posix.sep);
+        const meta = index.images[posixPath];
+        if (!meta || !Array.isArray(meta.folderIds)) continue;
+        const fi = meta.folderIds.indexOf(folderId);
+        if (fi !== -1) meta.folderIds.splice(fi, 1);
+    }
+    await writeMetadataIndex(userDataRoot, index);
+}
 
 export const router = express.Router();
 
+/**
+ * POST /api/image-metadata/folders/get
+ * List all virtual folders.
+ */
+router.post('/folders/get', async function (request, response) {
+    try {
+        const index = await readMetadataIndex(request.user.directories.root);
+        return response.json(index.folders || []);
+    } catch (error) {
+        console.error('[ImageMetadata] Folders list error:', error);
+        return response.status(500).json({ error: 'Internal server error.' });
+    }
+});
+
+/**
+ * POST /api/image-metadata/folders/create
+ * Create a new folder. Body: { name: string }
+ */
+router.post('/folders/create', async function (request, response) {
+    try {
+        const { name } = request.body;
+        if (!name || typeof name !== 'string') {
+            return response.status(400).json({ error: '"name" is required.' });
+        }
+        const folder = await createFolder(request.user.directories.root, name.trim());
+        return response.json(folder);
+    } catch (error) {
+        console.error('[ImageMetadata] Folder create error:', error);
+        return response.status(500).json({ error: 'Internal server error.' });
+    }
+});
+
+/**
+ * POST /api/image-metadata/folders/set-thumbnails
+ * Batch-set thumbnail files for multiple folders in one write. Body: { updates: [{id, thumbnailFile}] }
+ */
+router.post('/folders/set-thumbnails', async function (request, response) {
+    try {
+        const { updates } = request.body;
+        if (!Array.isArray(updates) || updates.some(u => !u.id || typeof u.thumbnailFile !== 'string')) {
+            return response.status(400).json({ error: '"updates" must be an array of {id, thumbnailFile}.' });
+        }
+        await setFolderThumbnailsBatch(request.user.directories.root, updates);
+        return response.json({ ok: true });
+    } catch (error) {
+        console.error('[ImageMetadata] Folder set-thumbnails error:', error);
+        return response.status(500).json({ error: 'Internal server error.' });
+    }
+});
+
+/**
+ * POST /api/image-metadata/folders/update
+ * Update a folder. Body: { id: string, name?: string, thumbnailFile?: string }
+ */
+router.post('/folders/update', async function (request, response) {
+    try {
+        const { id, ...updates } = request.body;
+        if (!id || typeof id !== 'string') {
+            return response.status(400).json({ error: '"id" is required.' });
+        }
+        const folder = await updateFolder(request.user.directories.root, id, updates);
+        return response.json(folder);
+    } catch (error) {
+        if (error.message.includes('not found')) {
+            return response.status(404).json({ error: error.message });
+        }
+        console.error('[ImageMetadata] Folder update error:', error);
+        return response.status(500).json({ error: 'Internal server error.' });
+    }
+});
+
+/**
+ * POST /api/image-metadata/folders/delete
+ * Delete a folder and unassign all images. Body: { id: string }
+ */
+router.post('/folders/delete', async function (request, response) {
+    try {
+        const { id } = request.body;
+        if (!id || typeof id !== 'string') {
+            return response.status(400).json({ error: '"id" is required.' });
+        }
+        await deleteFolder(request.user.directories.root, id);
+        return response.json({ ok: true });
+    } catch (error) {
+        if (error.message.includes('not found')) {
+            return response.status(404).json({ error: error.message });
+        }
+        console.error('[ImageMetadata] Folder delete error:', error);
+        return response.status(500).json({ error: 'Internal server error.' });
+    }
+});
+
+/**
+ * POST /api/image-metadata/folders/assign
+ * Assign images to a folder. Body: { id: string, paths: string[] }
+ */
+router.post('/folders/assign', async function (request, response) {
+    try {
+        const { id, paths } = request.body;
+        if (!id || typeof id !== 'string') {
+            return response.status(400).json({ error: '"id" is required.' });
+        }
+        if (!Array.isArray(paths)) {
+            return response.status(400).json({ error: '"paths" array is required.' });
+        }
+        await assignImagesToFolder(request.user.directories.root, id, paths);
+        return response.json({ ok: true });
+    } catch (error) {
+        if (error.message.includes('not found')) {
+            return response.status(404).json({ error: error.message });
+        }
+        console.error('[ImageMetadata] Folder assign error:', error);
+        return response.status(500).json({ error: 'Internal server error.' });
+    }
+});
+
+/**
+ * POST /api/image-metadata/folders/unassign
+ * Unassign images from a folder. Body: { id: string, paths: string[] }
+ */
+router.post('/folders/unassign', async function (request, response) {
+    try {
+        const { id, paths } = request.body;
+        if (!id || typeof id !== 'string') {
+            return response.status(400).json({ error: '"id" is required.' });
+        }
+        if (!Array.isArray(paths)) {
+            return response.status(400).json({ error: '"paths" array is required.' });
+        }
+        await unassignImagesFromFolder(request.user.directories.root, id, paths);
+        return response.json({ ok: true });
+    } catch (error) {
+        console.error('[ImageMetadata] Folder unassign error:', error);
+        return response.status(500).json({ error: 'Internal server error.' });
+    }
+});
+
 /**
  * POST /api/image-metadata
  * Get metadata for image(s) by path.