diff --git a/docs/guide/index.md b/docs/guide/index.md
index f76d0237918472..c11e5a24f99eaf 100644
--- a/docs/guide/index.md
+++ b/docs/guide/index.md
@@ -69,7 +69,7 @@ $ bun create vite
 
 Then follow the prompts!
 
-You can also directly specify the project name and the template you want to use via additional command line options. For example, to scaffold a Vite + Vue project, run:
+You can also directly specify the project name as the first parameter, and then template you want to use via additional command line options. For example, to scaffold a Vite + Vue project, run:
 
 ```bash
 # npm 7+, extra double-dash is needed:
@@ -85,6 +85,20 @@ pnpm create vite my-vue-app --template vue
 bun create vite my-vue-app --template vue
 ```
 
+The project name parameter also doubles as the target folder for your new Vite project. So the command:
+
+```bash
+npm create vite@latest my-vue-app -- --template vue
+```
+
+Will create your new project in the folder ./my-vue-app as a sub-folder of the folder from which you invoked the command, as well as setting its project name to "my-vue-app". If your project name/folder parameter contains a path then the project name will be taken from the deepest level folder of that path. So the the command:
+
+```bash
+npm create vite@latest ./my-sub-folder/my-vue-app -- --template vue
+```
+
+will create the project in that target folder, but set its project name to just "my-vue-app" again.
+
 See [create-vite](https://github.com/vitejs/vite/tree/main/packages/create-vite) for more details on each supported template: `vanilla`, `vanilla-ts`, `vue`, `vue-ts`, `react`, `react-ts`, `react-swc`, `react-swc-ts`, `preact`, `preact-ts`, `lit`, `lit-ts`, `svelte`, `svelte-ts`, `solid`, `solid-ts`, `qwik`, `qwik-ts`.
 
 You can use `.` for the project name to scaffold in the current directory.
diff --git a/packages/create-vite/__tests__/cli.spec.ts b/packages/create-vite/__tests__/cli.spec.ts
index 4f297032834fcf..7469ac09392696 100644
--- a/packages/create-vite/__tests__/cli.spec.ts
+++ b/packages/create-vite/__tests__/cli.spec.ts
@@ -8,6 +8,7 @@ const CLI_PATH = join(__dirname, '..')
 
 const projectName = 'test-app'
 const genPath = join(__dirname, projectName)
+const genPathWithSubfolder = join(__dirname, 'subfolder', projectName)
 
 const run = <SO extends SyncOptions>(
   args: string[],
@@ -17,12 +18,13 @@ const run = <SO extends SyncOptions>(
 }
 
 // Helper to create a non-empty directory
-const createNonEmptyDir = () => {
+const createNonEmptyDir = (overrideFolder?: string) => {
   // Create the temporary directory
-  fs.mkdirpSync(genPath)
+  const newNonEmptyFolder = overrideFolder || genPath
+  fs.mkdirpSync(newNonEmptyFolder)
 
   // Create a package.json file
-  const pkgJson = join(genPath, 'package.json')
+  const pkgJson = join(newNonEmptyFolder, 'package.json')
   fs.writeFileSync(pkgJson, '{ "foo": "bar" }')
 }
 
@@ -33,8 +35,24 @@ const templateFiles = fs
   .map((filePath) => (filePath === '_gitignore' ? '.gitignore' : filePath))
   .sort()
 
-beforeAll(() => fs.remove(genPath))
-afterEach(() => fs.remove(genPath))
+// React starter template
+const templateFilesReact = fs
+  .readdirSync(join(CLI_PATH, 'template-react'))
+  // _gitignore is renamed to .gitignore
+  .map((filePath) => (filePath === '_gitignore' ? '.gitignore' : filePath))
+  .sort()
+
+const clearAnyPreviousFolders = () => {
+  if (fs.existsSync(genPath)) {
+    fs.removeSync(genPath)
+  }
+  if (fs.existsSync(genPathWithSubfolder)) {
+    fs.removeSync(genPathWithSubfolder)
+  }
+}
+
+beforeAll(() => clearAnyPreviousFolders())
+afterEach(() => clearAnyPreviousFolders())
 
 test('prompts for the project name if none supplied', () => {
   const { stdout } = run([])
@@ -70,6 +88,14 @@ test('asks to overwrite non-empty target directory', () => {
   expect(stdout).toContain(`Target directory "${projectName}" is not empty.`)
 })
 
+test('asks to overwrite non-empty target directory with subfolder', () => {
+  createNonEmptyDir(genPathWithSubfolder)
+  const { stdout } = run([`subfolder/${projectName}`], { cwd: __dirname })
+  expect(stdout).toContain(
+    `Target directory "subfolder/${projectName}" is not empty.`,
+  )
+})
+
 test('asks to overwrite non-empty current directory', () => {
   createNonEmptyDir()
   const { stdout } = run(['.'], { cwd: genPath })
@@ -87,6 +113,17 @@ test('successfully scaffolds a project based on vue starter template', () => {
   expect(templateFiles).toEqual(generatedFiles)
 })
 
+test('successfully scaffolds a project with subfolder based on react starter template', () => {
+  const { stdout } = run([`subfolder/${projectName}`, '--template', 'react'], {
+    cwd: __dirname,
+  })
+  const generatedFiles = fs.readdirSync(genPathWithSubfolder).sort()
+
+  // Assertions
+  expect(stdout).toContain(`Scaffolding project in ${genPathWithSubfolder}`)
+  expect(templateFilesReact).toEqual(generatedFiles)
+})
+
 test('works with the -t alias', () => {
   const { stdout } = run([projectName, '-t', 'vue'], {
     cwd: __dirname,
diff --git a/packages/create-vite/src/index.ts b/packages/create-vite/src/index.ts
index ea22e52c2384a7..ca66dcf5a688ef 100755
--- a/packages/create-vite/src/index.ts
+++ b/packages/create-vite/src/index.ts
@@ -252,8 +252,7 @@ async function init() {
   const argTemplate = argv.template || argv.t
 
   let targetDir = argTargetDir || defaultTargetDir
-  const getProjectName = () =>
-    targetDir === '.' ? path.basename(path.resolve()) : targetDir
+  const getProjectName = () => path.basename(path.resolve(targetDir))
 
   let result: prompts.Answers<
     'projectName' | 'overwrite' | 'packageName' | 'framework' | 'variant'