diff --git a/diesel_cli/src/main.rs b/diesel_cli/src/main.rs
index 045248292c85..b21e99ef7014 100644
--- a/diesel_cli/src/main.rs
+++ b/diesel_cli/src/main.rs
@@ -183,7 +183,7 @@ fn generate_completions_command(matches: &ArgMatches) {
 /// Returns a `DatabaseError::ProjectRootNotFound` if no Cargo.toml is found.
 fn create_migrations_directory(path: &Path) -> Result<PathBuf, crate::errors::Error> {
     println!("Creating migrations directory at: {}", path.display());
-    fs::create_dir(path)?;
+    fs::create_dir_all(path)?;
     fs::File::create(path.join(".keep"))?;
     Ok(path.to_owned())
 }
diff --git a/diesel_cli/tests/database_setup.rs b/diesel_cli/tests/database_setup.rs
index ffedc1630a20..947ee706b149 100644
--- a/diesel_cli/tests/database_setup.rs
+++ b/diesel_cli/tests/database_setup.rs
@@ -152,6 +152,39 @@ fn database_setup_respects_migration_dir_by_arg() {
     assert!(db.table_exists("users"));
 }
 
+#[test]
+fn database_setup_respects_migration_nested_dir_by_arg() {
+    let p = project("database_setup_respects_migration_nested_dir_by_arg")
+        .folder("foo/bar")
+        .build();
+    let db = database(&p.database_url());
+
+    p.create_migration_in_directory(
+        "foo/bar",
+        "12345_create_users_table",
+        "CREATE TABLE users ( id INTEGER )",
+        Some("DROP TABLE users"),
+        None,
+    );
+
+    // sanity check
+    assert!(!db.exists());
+
+    let result = p
+        .command("database")
+        .arg("setup")
+        .arg("--migration-dir=foo/bar")
+        .run();
+
+    assert!(result.is_success(), "Result was unsuccessful {:?}", result);
+    assert!(
+        result.stdout().contains("Running migration 12345"),
+        "Unexpected stdout {}",
+        result.stdout()
+    );
+    assert!(db.table_exists("users"));
+}
+
 #[test]
 fn database_setup_respects_migration_dir_by_env() {
     let p = project("database_setup_respects_migration_dir_by_env")
diff --git a/diesel_cli/tests/support/project_builder.rs b/diesel_cli/tests/support/project_builder.rs
index c1199b1aba17..5110e409c599 100644
--- a/diesel_cli/tests/support/project_builder.rs
+++ b/diesel_cli/tests/support/project_builder.rs
@@ -45,7 +45,7 @@ impl ProjectBuilder {
         File::create(tempdir.path().join("Cargo.toml")).unwrap();
 
         for folder in self.folders {
-            fs::create_dir(tempdir.path().join(folder)).unwrap();
+            fs::create_dir_all(tempdir.path().join(folder)).unwrap();
         }
 
         for (file, contents) in self.files {