diff --git a/CHANGELOG.md b/CHANGELOG.md
index 437f81ad..f4882516 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -1,6 +1,8 @@
 Unreleased
 ----------
- -
+**Bugfixes**
+ - Fixed an issue where `folders.create_folder()` would attempt to use root folder as parent if desired parent
+   folder wasn't found.  Now correctly handles parent folders and raises an error if folder not found.
 
 v1.6.3 (2021-09-23)
 -------------------
diff --git a/src/sasctl/_services/folders.py b/src/sasctl/_services/folders.py
index 2c05dec3..9d78546c 100644
--- a/src/sasctl/_services/folders.py
+++ b/src/sasctl/_services/folders.py
@@ -25,37 +25,43 @@ class Folders(Service):
     @classmethod
     @sasctl_command('folders', 'create')
     def create_folder(cls, name, parent=None, description=None):
-        """
+        """Create a new folder.
 
         Parameters
         ----------
         name : str
             The name of the new folder
         parent : str or dict, optional
-            The parent folder for this folder, if any.  Can be a folder name,
-            id, or dict response from `get_folder`
+            The parent folder for this folder, if any.  Can be a folder name, id, or dict response from `get_folder`.
+            If not specified, new folder will be created under root folder.
         description : str, optional
             A description of the folder
 
         Returns
         -------
+        RestObj
+            Details of newly-created folder
 
         """
         if parent is not None:
-            parent = cls.get_folder(parent)
+            parent_obj = cls.get_folder(parent)
 
-            if parent is None:
-                raise ValueError('`parent` folder does not exist')
+            parent_uri = cls.get_link(parent_obj, 'self')
+            if parent_uri is None:
+                raise ValueError("`parent` folder '%s' does not exist." % parent)
+            parent_uri = parent_uri['uri']
+        else:
+            parent_uri = None
 
         body = {
             'name': name,
             'description': description,
-            'folderType': 'folder',
-            'parentFolderUri': '/folders/folders/'+parent.id if parent else None,
+            'folderType': 'folder'
         }
 
         return cls.post(
             '/folders',
             json=body,
+            params={'parentFolderUri': parent_uri},
             headers={'Content-Type': 'application/vnd.sas.content.folder+json'},
         )
diff --git a/tests/unit/test_folders.py b/tests/unit/test_folders.py
new file mode 100644
index 00000000..bcb90ad9
--- /dev/null
+++ b/tests/unit/test_folders.py
@@ -0,0 +1,71 @@
+#!/usr/bin/env python
+# encoding: utf-8
+#
+# Copyright © 2022, SAS Institute Inc., Cary, NC, USA.  All Rights Reserved.
+# SPDX-License-Identifier: Apache-2.0
+
+from unittest import mock
+
+import pytest
+from sasctl.services import folders
+
+
+def test_create_folder_basic():
+    """Create a folder with minimal parameters."""
+    FOLDER_NAME = 'Spam'
+
+    with mock.patch('sasctl._services.folders.Folders.post') as post:
+        folders.create_folder(FOLDER_NAME)
+
+    assert post.called
+    json = post.call_args[1]['json']
+    params = post.call_args[1]['params']
+    assert json['name'] == FOLDER_NAME
+    assert json['description'] is None
+    assert params['parentFolderUri'] is None
+
+
+def test_create_folder_with_desc():
+    """Ensure description parameter is passed."""
+    FOLDER_NAME = 'Spam'
+    FOLDER_DESC = 'Created by sasctl testing.'
+
+    with mock.patch('sasctl._services.folders.Folders.post') as post:
+        folders.create_folder(FOLDER_NAME, description=FOLDER_DESC)
+
+    assert post.called
+    json = post.call_args[1]['json']
+    params = post.call_args[1]['params']
+    assert json['name'] == FOLDER_NAME
+    assert json['description'] == FOLDER_DESC
+    assert params['parentFolderUri'] is None
+
+
+def test_create_folder_with_parent():
+    """Ensure parent folder parameter is handled correctly."""
+    from sasctl.core import RestObj
+
+    FOLDER_NAME = 'Spam'
+
+    # Mock response when retrieving parent folder.
+    PARENT_FOLDER = RestObj({'name': '', 'id': '123', 'links': [
+        {'rel': 'self', 'uri': '/folders/somewhere/spam-eggs-spam-spam'}
+    ]})
+
+    with mock.patch('sasctl._services.folders.Folders.get_folder', return_value=PARENT_FOLDER):
+        with mock.patch('sasctl._services.folders.Folders.post') as post:
+            folders.create_folder(FOLDER_NAME, parent='Doesnt Matter')
+
+    # Should have tried to create folder with correct name and parent URI
+    assert post.called
+    json = post.call_args[1]['json']
+    params = post.call_args[1]['params']
+    assert json['name'] == FOLDER_NAME
+    assert json['description'] is None
+    assert params['parentFolderUri'] == PARENT_FOLDER['links'][0]['uri']
+
+    # If parent folder can't be found, error should be raised
+    with mock.patch('sasctl._services.folders.Folders.get_folder', return_value=None):
+        with mock.patch('sasctl._services.folders.Folders.post'):
+            with pytest.raises(ValueError):
+                folders.create_folder(FOLDER_NAME, parent='Doesnt Matter')