Right-click New Folder not working in Windows 11/10
1] Using Registry
If you cannot create a new folder, when you click on New > Folder context menu item but instead a new shortcut is created, try this: Open Run prompt (Win + R) and then type Regedit followed by pressing the Enter key to open Registry editor You will be prompted by UAC for admin permission if necessary. Navigate to: Right-click and create a string with the name – (Default) Double click to edit the value, and set it as: Many times third-party applications, especially those which allow you to edit the right-click menus, can cause this problem if not used properly.
2] Change Handler to Handler 2 and NullFile to NullFile 2
One of the forum users reported that he was able to find a lot of keys which should not have been there under the path HKEY_CLASSES_ROOT\Folder\ShellNew For example, he located this set. The Handler was causing the problem and was creating a shortcut instead of a folder. When it was changed from Handler to Handler2, and NullFile to NullFile2, it started working. He also mentioned that there must be an empty string with the name Directory.
3] ShellExView — Enable Disable Right-Click Menu
An easy way to fix problems with the right-click context menu is using ShellExView. If any of the registry value causes a problem, you can use it to fix it. We have listed many more right-click menu editor or shell editors that you find and download using the links in the post.
4] Reset your Windows PC
If nothing helps, you may use the Reset This PC option, making sure that you opt to save your files. I hope the post helps you, and you are able to create folders again.