diff --git a/vsintegration/src/unittests/TestLib.ProjectSystem.fs b/vsintegration/src/unittests/TestLib.ProjectSystem.fs
index 1a6acd05da8..491298f3c82 100644
--- a/vsintegration/src/unittests/TestLib.ProjectSystem.fs
+++ b/vsintegration/src/unittests/TestLib.ProjectSystem.fs
@@ -170,7 +170,7 @@ type TheTests() =
                  | x -> x
         match TryFind node with
         | Some(x) -> x
-        | None -> failwith "did not find node with caption %s" caption
+        | None -> failwithf "did not find node with caption %s" caption
        
     static member MoveDown(node : HierarchyNode) =
         match node with
diff --git a/vsintegration/src/unittests/Tests.ProjectSystem.Project.fs b/vsintegration/src/unittests/Tests.ProjectSystem.Project.fs
index a26c17afa78..9f35257c3c0 100644
--- a/vsintegration/src/unittests/Tests.ProjectSystem.Project.fs
+++ b/vsintegration/src/unittests/Tests.ProjectSystem.Project.fs
@@ -695,6 +695,68 @@ type Project() =
                 File.Delete(absFilePath)
             ))
     
+    [<Test>] //ref bug https://github.com/Microsoft/visualfsharp/issues/259
+    member public this.``RenameFile.InFolder``() =
+        this.MakeProjectAndDo(["file1.fs"; @"Folder1\file2.fs"; @"Folder1\nested1.fs"], [], "", (fun project ->
+            let absFilePath = Path.Combine(project.ProjectFolder, "Folder1", "nested1.fs")
+            try
+                Directory.CreateDirectory(Path.GetDirectoryName(absFilePath)) |> ignore;
+                File.AppendAllText(absFilePath, "#light")
+                let orig1 = TheTests.FindNodeWithCaption(project, "nested1.fs")
+                let folder1 = TheTests.FindNodeWithCaption(project, "Folder1")
+                VsMocks.vsRunningDocumentTableFindAndLockDocumentVsHierarchyMock <- project
+                
+                let added, deleted = ResizeArray(), ResizeArray()
+
+                let sink = 
+                    { new IVsHierarchyEvents with
+                        member x.OnInvalidateIcon _hicon = VSConstants.S_OK
+                        member x.OnInvalidateItems _itemidParent = VSConstants.S_OK
+                        member x.OnItemAdded (itemidParent, itemidSiblingPrev, itemidAdded) = 
+                            added.Add(itemidParent, itemidSiblingPrev, itemidAdded)
+                            VSConstants.S_OK
+                        member x.OnItemDeleted (itemid) =
+                            deleted.Add(itemid)
+                            VSConstants.S_OK
+                        member x.OnItemsAppended (itemidParent) =
+                            VSConstants.S_OK
+                        member x.OnPropertyChanged (itemid, propid, flags) =
+                            VSConstants.S_OK }
+
+                let cookie = ref 0u
+                project.AdviseHierarchyEvents(sink, cookie) |> ErrorHandler.ThrowOnFailure |> ignore
+
+                // rename the file
+                orig1.SetEditLabel("renamedNested2.fs") |> ErrorHandler.ThrowOnFailure |> ignore
+
+                SaveProject project
+
+                let file2 = TheTests.FindNodeWithCaption (project, "file2.fs")
+                let renamedNested2 = TheTests.FindNodeWithCaption (project, "renamedNested2.fs")
+
+                AssertEqual [ folder1.ID, file2.ID, renamedNested2.ID ] (added |> Seq.distinct |> List.ofSeq)
+                AssertEqual [ orig1.ID ] (deleted |> Seq.distinct |> List.ofSeq)
+
+                // TODO ensure IVsTrackProjectDocumentsEvents Renamed was fired
+
+                // ensure right in .fsproj
+                let msbuildInfo = TheTests.MsBuildCompileItems(project.BuildProject)
+                AssertEqual ["file1.fs"; @"Folder1\file2.fs"; @"Folder1\renamedNested2.fs"] msbuildInfo
+
+                // ensure right in solution explorer
+                let expect = 
+                    Tree("References", ANYTREE,
+                    Tree("file1.fs", Nil,
+                    Tree("Folder1", 
+                       Tree("file2.fs", Nil,
+                       Tree("renamedNested2.fs", Nil, Nil)),
+                    Nil)))
+                TheTests.AssertSameTree (expect, project.FirstChild)
+
+            finally
+                if File.Exists(absFilePath) then File.Delete(absFilePath)
+            ))
+    
     [<Test>]
     member public this.``RenameFile.BuildActionIsResetBasedOnFilenameExtension``() =
         let GetTextFromBuildAction (action:VSLangProj.prjBuildAction) =
diff --git a/vsintegration/src/vs/FsPkgs/FSharp.Project/FS/Project.fs b/vsintegration/src/vs/FsPkgs/FSharp.Project/FS/Project.fs
index 17181fe6540..512a7d441e7 100644
--- a/vsintegration/src/vs/FsPkgs/FSharp.Project/FS/Project.fs
+++ b/vsintegration/src/vs/FsPkgs/FSharp.Project/FS/Project.fs
@@ -2663,7 +2663,7 @@ See also ...\SetupAuthoring\FSharp\Registry\FSProjSys_Registration.wxs, e.g.
                     nodeBeforeMe.NextSibling <- lastNode
                     lastNode.NextSibling <- thisNode
                 
-                root.OnItemAdded(root, lastNode)
+                root.OnItemAdded(lastNode.Parent, lastNode)
                 lastNode :?> FSharpFileNode
 
             /// In solution explorer, move the last of my siblings to just below me, return the moved FSharpFileNode
@@ -2682,7 +2682,7 @@ See also ...\SetupAuthoring\FSharp\Registry\FSProjSys_Registration.wxs, e.g.
                 let tmp = target.NextSibling 
                 target.NextSibling <- lastNode
                 lastNode.NextSibling <- tmp
-                root.OnItemAdded(root, lastNode)
+                root.OnItemAdded(lastNode.Parent, lastNode)
                 lastNode :?> FSharpFileNode
 
             override x.ExecCommandOnNode(guidCmdGroup:Guid, cmd:uint32, nCmdexecopt:uint32, pvaIn:IntPtr, pvaOut:IntPtr ) =