diff --git a/src/xenia/kernel/xboxkrnl/xboxkrnl_io.cc b/src/xenia/kernel/xboxkrnl/xboxkrnl_io.cc
index 63ad15009..fba20d814 100644
--- a/src/xenia/kernel/xboxkrnl/xboxkrnl_io.cc
+++ b/src/xenia/kernel/xboxkrnl/xboxkrnl_io.cc
@@ -109,7 +109,9 @@ dword_result_t NtCreateFile(lpdword_t handle_out, dword_t desired_access,
   vfs::FileAction file_action;
   X_STATUS result = kernel_state()->file_system()->OpenFile(
       target_path, vfs::FileDisposition((uint32_t)creation_disposition),
-      desired_access, &vfs_file, &file_action);
+      desired_access,
+      (create_options & CreateOptions::FILE_DIRECTORY_FILE) != 0, &vfs_file,
+      &file_action);
   object_ref<XFile> file = nullptr;
 
   X_HANDLE handle = X_INVALID_HANDLE_VALUE;
diff --git a/src/xenia/kernel/xfile.cc b/src/xenia/kernel/xfile.cc
index 8f0dc8f51..68461edce 100644
--- a/src/xenia/kernel/xfile.cc
+++ b/src/xenia/kernel/xfile.cc
@@ -8,6 +8,7 @@
  */
 
 #include "xenia/kernel/xfile.h"
+#include "xenia/vfs/virtual_file_system.h"
 
 #include "xenia/base/byte_stream.h"
 #include "xenia/base/logging.h"
@@ -178,6 +179,8 @@ bool XFile::Save(ByteStream* stream) {
   stream->Write(file_->entry()->absolute_path());
   stream->Write<uint64_t>(position_);
   stream->Write(file_access());
+  stream->Write<bool>(
+      (file_->entry()->attributes() & vfs::kFileAttributeDirectory) != 0);
   stream->Write<bool>(is_synchronous_);
 
   return true;
@@ -195,6 +198,7 @@ object_ref<XFile> XFile::Restore(KernelState* kernel_state,
   auto abs_path = stream->Read<std::string>();
   uint64_t position = stream->Read<uint64_t>();
   auto access = stream->Read<uint32_t>();
+  auto is_directory = stream->Read<bool>();
   auto is_synchronous = stream->Read<bool>();
 
   XELOGD("XFile %.8X (%s)", file->handle(), abs_path.c_str());
@@ -202,7 +206,8 @@ object_ref<XFile> XFile::Restore(KernelState* kernel_state,
   vfs::File* vfs_file = nullptr;
   vfs::FileAction action;
   auto res = kernel_state->file_system()->OpenFile(
-      abs_path, vfs::FileDisposition::kOpen, access, &vfs_file, &action);
+      abs_path, vfs::FileDisposition::kOpen, access, is_directory, &vfs_file,
+      &action);
   if (XFAILED(res)) {
     XELOGE("Failed to open XFile: error %.8X", res);
     return object_ref<XFile>(file);
diff --git a/src/xenia/vfs/virtual_file_system.cc b/src/xenia/vfs/virtual_file_system.cc
index 951ea032c..acef5e865 100644
--- a/src/xenia/vfs/virtual_file_system.cc
+++ b/src/xenia/vfs/virtual_file_system.cc
@@ -181,8 +181,11 @@ bool VirtualFileSystem::DeletePath(const std::string& path) {
 
 X_STATUS VirtualFileSystem::OpenFile(const std::string& path,
                                      FileDisposition creation_disposition,
-                                     uint32_t desired_access, File** out_file,
-                                     FileAction* out_action) {
+                                     uint32_t desired_access, bool is_directory,
+                                     File** out_file, FileAction* out_action) {
+  // TODO(gibbed): should 'is_directory' remaina s a bool or should it be
+  // flipped to a generic FileAttributeFlags?
+
   // Cleanup access.
   if (desired_access & FileAccess::kGenericRead) {
     desired_access |= FileAccess::kFileReadData;
@@ -285,7 +288,8 @@ X_STATUS VirtualFileSystem::OpenFile(const std::string& path,
   }
   if (!entry) {
     // Create if needed (either new or as a replacement).
-    entry = CreatePath(path, kFileAttributeNormal);
+    entry = CreatePath(
+        path, !directory ? kFileAttributeNormal : kFileAttributeDirectory);
     if (!entry) {
       return X_STATUS_ACCESS_DENIED;
     }
diff --git a/src/xenia/vfs/virtual_file_system.h b/src/xenia/vfs/virtual_file_system.h
index 4eb0fb27d..94a2872ec 100644
--- a/src/xenia/vfs/virtual_file_system.h
+++ b/src/xenia/vfs/virtual_file_system.h
@@ -43,7 +43,7 @@ class VirtualFileSystem {
 
   X_STATUS OpenFile(const std::string& path,
                     FileDisposition creation_disposition,
-                    uint32_t desired_access, File** out_file,
+                    uint32_t desired_access, bool is_directory, File** out_file,
                     FileAction* out_action);
 
  private: