diff --git a/mod/folder/db/install.xml b/mod/folder/db/install.xml
index 9481f0534f5..aacb69233be 100644
--- a/mod/folder/db/install.xml
+++ b/mod/folder/db/install.xml
@@ -1,5 +1,5 @@
 <?xml version="1.0" encoding="UTF-8" ?>
-<XMLDB PATH="mod/folder/db" VERSION="20130121" COMMENT="XMLDB file for Folder module"
+<XMLDB PATH="mod/folder/db" VERSION="20130315" COMMENT="XMLDB file for Folder module"
     xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"
     xsi:noNamespaceSchemaLocation="../../../lib/xmldb/xmldb.xsd"
 >
@@ -14,6 +14,7 @@
         <FIELD NAME="revision" TYPE="int" LENGTH="10" NOTNULL="true" DEFAULT="0" SEQUENCE="false" COMMENT="incremented when after each file changes, solves browser caching issues"/>
         <FIELD NAME="timemodified" TYPE="int" LENGTH="10" NOTNULL="true" DEFAULT="0" SEQUENCE="false"/>
         <FIELD NAME="display" TYPE="int" LENGTH="4" NOTNULL="true" DEFAULT="0" SEQUENCE="false" COMMENT="Display type of folder contents - on a separate page or inline"/>
+        <FIELD NAME="show_expanded" TYPE="int" LENGTH="1" NOTNULL="true" UNSIGNED="false" DEFAULT="1" SEQUENCE="false" COMMENT="1 = expanded, 0 = collapsed for sub-folders"/>
       </FIELDS>
       <KEYS>
         <KEY NAME="primary" TYPE="primary" FIELDS="id"/>
@@ -23,4 +24,4 @@
       </INDEXES>
     </TABLE>
   </TABLES>
-</XMLDB>
\ No newline at end of file
+</XMLDB>
diff --git a/mod/folder/db/upgrade.php b/mod/folder/db/upgrade.php
index 9db0090baa5..fabe0c98b2d 100644
--- a/mod/folder/db/upgrade.php
+++ b/mod/folder/db/upgrade.php
@@ -58,7 +58,6 @@ function xmldb_folder_upgrade($oldversion) {
     // Moodle v2.3.0 release upgrade line
     // Put any upgrade step following this
 
-
     // Moodle v2.4.0 release upgrade line
     // Put any upgrade step following this
 
@@ -77,5 +76,20 @@ function xmldb_folder_upgrade($oldversion) {
         upgrade_mod_savepoint(true, 2013012100, 'folder');
     }
 
+    if ($oldversion < 2013031500) {
+
+        // Define field show_expanded to be added to folder
+        $table = new xmldb_table('folder');
+        $field = new xmldb_field('show_expanded', XMLDB_TYPE_INTEGER, '1', null, XMLDB_NOTNULL, null, '1', 'revision');
+
+        // Conditionally launch add field show_expanded
+        if (!$dbman->field_exists($table, $field)) {
+            $dbman->add_field($table, $field);
+        }
+
+        // folder savepoint reached
+        upgrade_mod_savepoint(true, 2013031500, 'folder');
+    }
+
     return true;
 }
diff --git a/mod/folder/lang/en/folder.php b/mod/folder/lang/en/folder.php
index b7130632939..e5d68ce57c5 100644
--- a/mod/folder/lang/en/folder.php
+++ b/mod/folder/lang/en/folder.php
@@ -51,3 +51,5 @@ Also note that participants view actions can not be logged in this case.';
 $string['displaypage'] = 'On a separate page';
 $string['displayinline'] = 'Inline on a course page';
 $string['noautocompletioninline'] = 'Automatic completion on viewing of activity can not be selected together with "Display inline" option';
+$string['show_expanded'] = 'Show sub-folders expanded';
+$string['show_expanded_help'] = 'If enabled, will display sub-folders expanded by default. Else, sub-folders will display collapsed.';
diff --git a/mod/folder/mod_form.php b/mod/folder/mod_form.php
index 70af9e1e6af..99f1debfb6a 100644
--- a/mod/folder/mod_form.php
+++ b/mod/folder/mod_form.php
@@ -55,7 +55,10 @@ class mod_folder_mod_form extends moodleform_mod {
         $mform->addHelpButton('display', 'display', 'mod_folder');
         $mform->setExpanded('content');
 
-
+        // Adding option to show sub-folders expanded or collapsed by default.
+        $mform->addElement('advcheckbox', 'show_expanded', get_string('show_expanded', 'folder'));
+        $mform->addHelpButton('show_expanded', 'show_expanded', 'mod_folder');
+        $mform->setDefault('show_expanded', $config->show_expanded);
         //-------------------------------------------------------
         $this->standard_coursemodule_elements();
 
diff --git a/mod/folder/module.js b/mod/folder/module.js
index 415d167201f..5e0e638ea2d 100644
--- a/mod/folder/module.js
+++ b/mod/folder/module.js
@@ -35,6 +35,9 @@ M.mod_folder.init_tree = function(Y, id, expand_all) {
 
         if (expand_all) {
             tree.expandAll();
+        } else {
+            // Else just expand the top node.
+            tree.getNodeByIndex(1).expand();            
         }
 
         tree.render();
diff --git a/mod/folder/renderer.php b/mod/folder/renderer.php
index c9dbbb7e6bf..830387046df 100644
--- a/mod/folder/renderer.php
+++ b/mod/folder/renderer.php
@@ -78,8 +78,12 @@ class mod_folder_renderer extends plugin_renderer_base {
         $content .= '<div id="'.$id.'" class="filemanager">';
         $content .= $this->htmllize_tree($tree, array('files' => array(), 'subdirs' => array($tree->dir)));
         $content .= '</div>';
-        $this->page->requires->js_init_call('M.mod_folder.init_tree', array($id, true));
-        return $content;
+        $show_expanded = true;
+        if (empty($tree->folder->show_expanded)) {
+            $show_expanded = false;
+        }
+        $this->page->requires->js_init_call('M.mod_folder.init_tree', array($id, $show_expanded));
+        return $content;        
     }
 
     /**
diff --git a/mod/folder/settings.php b/mod/folder/settings.php
index c0034bd8ec0..4cfea08c7c6 100644
--- a/mod/folder/settings.php
+++ b/mod/folder/settings.php
@@ -30,4 +30,8 @@ if ($ADMIN->fulltree) {
     //--- general settings -----------------------------------------------------------------------------------
     $settings->add(new admin_setting_configcheckbox('folder/requiremodintro',
         get_string('requiremodintro', 'admin'), get_string('configrequiremodintro', 'admin'), 1));
+
+    $settings->add(new admin_setting_configcheckbox('folder/show_expanded',
+            get_string('show_expanded', 'folder'),
+            get_string('show_expanded_help', 'folder'), 1));
 }
diff --git a/mod/folder/version.php b/mod/folder/version.php
index 1e168a3f5b0..c3cf83bbc6c 100644
--- a/mod/folder/version.php
+++ b/mod/folder/version.php
@@ -25,7 +25,7 @@
 
 defined('MOODLE_INTERNAL') || die();
 
-$module->version   = 2013012100;       // The current module version (Date: YYYYMMDDXX)
+$module->version   = 2013031500;       // The current module version (Date: YYYYMMDDXX)
 $module->requires  = 2012112900;    // Requires this Moodle version
 $module->component = 'mod_folder';     // Full name of the plugin (used for diagnostics)
 $module->cron      = 0;