diff --git a/Fixtures/TestProject/NestedFiles/Foo/Nested.swift b/Fixtures/TestProject/NestedFiles/Foo/Nested.swift
new file mode 100644
index 00000000..b5c22056
--- /dev/null
+++ b/Fixtures/TestProject/NestedFiles/Foo/Nested.swift
@@ -0,0 +1,3 @@
+func nested() -> String {
+  return "Nested"
+}
diff --git a/Fixtures/TestProject/Project.xcodeproj/project.pbxproj b/Fixtures/TestProject/Project.xcodeproj/project.pbxproj
index 3af1b493..2a3c370c 100644
--- a/Fixtures/TestProject/Project.xcodeproj/project.pbxproj
+++ b/Fixtures/TestProject/Project.xcodeproj/project.pbxproj
@@ -165,6 +165,15 @@
 				FR7078510801 /* FrameworkFile.swift */,
 				FR1345298503 /* Info.plist */,
 				FR7740960501 /* MyFramework.h */,
+				FR7078510801 /* FrameworkFile.swift */,
+				FR1345298503 /* Info.plist */,
+				FR7740960501 /* MyFramework.h */,
+				FR7078510801 /* FrameworkFile.swift */,
+				FR1345298503 /* Info.plist */,
+				FR7740960501 /* MyFramework.h */,
+				FR7078510801 /* FrameworkFile.swift */,
+				FR1345298503 /* Info.plist */,
+				FR7740960501 /* MyFramework.h */,
 			);
 			name = Framework;
 			path = Framework;
@@ -258,6 +267,9 @@
 				G82523211001 /* App_iOS */,
 				G78312289901 /* App_iOS_Tests */,
 				G46615002701 /* Framework */,
+				G46615002701 /* Framework */,
+				G46615002701 /* Framework */,
+				G46615002701 /* Framework */,
 				G86202385201 /* Products */,
 				G19527407101 /* Frameworks */,
 			);
diff --git a/Sources/ProjectSpec/ProjectSpec.swift b/Sources/ProjectSpec/ProjectSpec.swift
index 1cf01830..ad69f678 100644
--- a/Sources/ProjectSpec/ProjectSpec.swift
+++ b/Sources/ProjectSpec/ProjectSpec.swift
@@ -29,6 +29,7 @@ public struct ProjectSpec {
 
     public struct Options {
         public var carthageBuildPath: String?
+        public var createIntermediateGroups: Bool
         public var bundleIdPrefix: String?
         public var settingPresets: SettingPresets = .all
 
@@ -54,6 +55,7 @@ public struct ProjectSpec {
         }
 
         public init() {
+            createIntermediateGroups = false
         }
     }
 
@@ -160,5 +162,6 @@ extension ProjectSpec.Options: JSONObjectConvertible {
         carthageBuildPath = jsonDictionary.json(atKeyPath: "carthageBuildPath")
         bundleIdPrefix = jsonDictionary.json(atKeyPath: "bundleIdPrefix")
         settingPresets = jsonDictionary.json(atKeyPath: "settingPresets") ?? .all
+        createIntermediateGroups = jsonDictionary.json(atKeyPath: "createIntermediateGroups") ?? false
     }
 }
diff --git a/Sources/XcodeGenKit/PBXProjGenerator.swift b/Sources/XcodeGenKit/PBXProjGenerator.swift
index 4992666a..31b4bb01 100644
--- a/Sources/XcodeGenKit/PBXProjGenerator.swift
+++ b/Sources/XcodeGenKit/PBXProjGenerator.swift
@@ -512,6 +512,47 @@ public class PBXProjGenerator {
         return (fromFiles + fromDirs).flatMap { $0.sourceFiles }
     }
 
+    func getSingleGroup(path: Path, mergingChildren children: [String], depth: Int = 0) -> PBXGroup {
+        let group: PBXGroup
+        if let cachedGroup = groupsByPath[path] {
+            cachedGroup.children += children
+            group = cachedGroup
+        } else {
+            group = PBXGroup(
+                reference: generateUUID(PBXGroup.self, path.lastComponent),
+                children: children,
+                sourceTree: .group,
+                name: path.lastComponent,
+                path: depth == 0 && !spec.options.createIntermediateGroups ?
+                    path.byRemovingBase(path: spec.basePath).string :
+                    path.lastComponent
+            )
+            addObject(group)
+            groupsByPath[path] = group
+        }
+        return group
+    }
+
+    // Add groups for all parents recursively
+    // ex: path/foo/bar/baz/Hello.swift -> path:[foo:[bar:[baz:[Hello.swift]]]]
+    func getIntermediateGroups(path: Path, group: PBXGroup) -> PBXGroup {
+        // verify path is a subpath of spec.basePath
+        guard Path(components: zip(path.components, spec.basePath.components).map{ $0.0 }) == spec.basePath else {
+            return group
+        }
+
+        // base case
+        if path == spec.basePath {
+            return group
+        }
+
+        // recursive case
+        return getIntermediateGroups(
+            path: path.parent(),
+            group: getSingleGroup(path: path, mergingChildren: [group.reference])
+        )
+    }
+
     func getSources(path: Path, children: [Path]? = nil, depth: Int = 0) throws -> (sourceFiles: [SourceFile], groups: [PBXGroup]) {
         let children = try children ?? (try path.children())
         let excludedFiles: [String] = [".DS_Store"]
@@ -605,17 +646,18 @@ public class PBXProjGenerator {
             }
         }
 
-        let groupPath: String = depth == 0 ? path.byRemovingBase(path: spec.basePath).string : path.lastComponent
         let group: PBXGroup
-        if let cachedGroup = groupsByPath[path] {
-            group = cachedGroup
+        if spec.options.createIntermediateGroups {
+            group = getIntermediateGroups(
+                path: path.parent(),
+                group: getSingleGroup(path: path, mergingChildren: groupChildren, depth: depth)
+            )
         } else {
-            group = PBXGroup(reference: generateUUID(PBXGroup.self, path.lastComponent), children: groupChildren, sourceTree: .group, name: path.lastComponent, path: groupPath)
-            addObject(group)
-            if depth == 0 {
-                topLevelGroups.append(group)
-            }
-            groupsByPath[path] = group
+            group = getSingleGroup(path: path, mergingChildren: groupChildren, depth: depth)
+        }
+
+        if depth == 0 {
+            topLevelGroups.append(group)
         }
         groups.insert(group, at: 0)
         return (allSourceFiles, groups)
diff --git a/docs/ProjectSpec.md b/docs/ProjectSpec.md
index 05001f7a..46001d34 100644
--- a/docs/ProjectSpec.md
+++ b/docs/ProjectSpec.md
@@ -63,6 +63,7 @@ Note that target names can also be changed by adding a `name` property to a targ
 
 ### Options
 - ⚪️ **carthageBuildPath**: `String` - The path to the carthage build directory. Defaults to `Carthage/Build`. This is used when specifying target carthage dependencies
+- ⚪️ **createIntermediateGroups**: `String` - If this is specified and set to `true`, then intermediate groups will be created for every path component between the folder containing the source and the base path. For example, when enabled if a source path is specified as `Vendor/Foo/Hello.swift`, the group `Vendor` will created as a parent of the `Foo` group.
 - ⚪️ **bundleIdPrefix**: `String` - If this is specified then any target that doesn't have an `PRODUCT_BUNDLE_IDENTIFIER` (via all levels of build settings) will get an autogenerated one by combining `bundleIdPrefix` and the target name: `bundleIdPrefix.name`. The target name will be stripped of all characters that aren't alphanumerics, hyphens, or periods. Underscores will be replace with hyphens.
 - ⚪️ **settingPresets**: `String` - This controls the settings that are automatically applied to the project and its targets. These are the same build settings that Xcode would add when creating a new project. Project settings are applied by config type. Target settings are applied by the product type and platform. By default this is set to `all`
 	- `all`: project and target settings