diff --git a/app/main/views/conversation.py b/app/main/views/conversation.py
index 65016bca3..83a06cfb7 100644
--- a/app/main/views/conversation.py
+++ b/app/main/views/conversation.py
@@ -1,5 +1,5 @@
 from flask import jsonify, redirect, render_template, session, url_for
-from flask_login import login_required
+from flask_login import current_user, login_required
 from notifications_python_client.errors import HTTPError
 from notifications_utils.recipients import format_phone_number_human_readable
 from notifications_utils.template import SMSPreviewTemplate
@@ -7,6 +7,7 @@ from notifications_utils.template import SMSPreviewTemplate
 from app import current_service, notification_api_client, service_api_client
 from app.main import main
 from app.main.forms import SearchByNameForm
+from app.models.template_list import TemplateList
 from app.utils import user_has_permissions
 
 
@@ -38,20 +39,26 @@ def conversation_updates(service_id, notification_id):
 
 
 @main.route("/services/<service_id>/conversation/<notification_id>/reply-with")
+@main.route("/services/<service_id>/conversation/<notification_id>/reply-with/from-folder/<uuid:from_folder>")
 @login_required
 @user_has_permissions('send_messages')
 def conversation_reply(
     service_id,
     notification_id,
+    from_folder=None,
 ):
-    templates = current_service.get_templates('sms')
     return render_template(
         'views/templates/choose-reply.html',
-        templates=templates,
-        show_search_box=(len(templates) > 7),
-        template_type='sms',
+        templates_and_folders=TemplateList(
+            current_service,
+            template_folder_id=from_folder,
+            user_id=current_user.id,
+            template_type='sms'
+        ),
+        template_folder_path=current_service.get_template_folder_path(from_folder),
         search_form=SearchByNameForm(),
         notification_id=notification_id,
+        template_type='sms'
     )
 
 
diff --git a/app/templates/views/templates/choose-reply.html b/app/templates/views/templates/choose-reply.html
index 05856fb89..23b5a68bf 100644
--- a/app/templates/views/templates/choose-reply.html
+++ b/app/templates/views/templates/choose-reply.html
@@ -2,6 +2,7 @@
 {% from "components/message-count-label.html" import message_count_label %}
 {% from "components/textbox.html" import textbox %}
 {% from "components/live-search.html" import live_search %}
+{% from "components/folder-path.html" import folder_path %}
 
 {% extends "withnav_template.html" %}
 
@@ -11,9 +12,12 @@
 
 {% block maincolumn_content %}
 
+<div class="bottom-gutter-1-2">
   <h1 class="heading-large">Choose a template</h1>
+  {{ folder_path(template_folder_path, current_service.id, template_type) }}
+</div>
 
-  {% if not templates %}
+  {% if not templates_and_folders.templates_to_show %}
 
     {% if current_user.has_permissions('manage_templates') %}
        <p class="bottom-gutter">
@@ -29,20 +33,35 @@
 
   {% else %}
 
-    {{ live_search(target_selector='#template-list .column-whole', show=show_search_box, form=search_form) }}
+    {{ live_search(target_selector='#template-list .column-whole', show=True, form=search_form) }}
 
-    <nav class="grid-row" id=template-list>
-      {% for template in templates %}
-        <div class="column-whole">
+    <nav id="template-list">
+      {% for item in templates_and_folders %}
+        <div class="template-list-item {% if item.ancestors %}template-list-item-hidden-by-default{% endif %} {% if not item.ancestors %}template-list-item-without-ancestors{% endif %}">
           <h2 class="message-name">
-            <a href="{{ url_for('.conversation_reply_with_template', service_id=current_service.id, template_id=template.id, notification_id=notification_id) }}">{{ template.name }}</a>
+            {% for ancestor in item.ancestors %}
+                <a href="{{ url_for('.conversation_reply', service_id=current_service.id, notification_id=notification_id, from_folder=ancestor.id) }}" class="template-list-folder">
+                {{ ancestor.name }}
+              </a> <span class="message-name-separator">/</span>
+            {% endfor %}
+            {% if item.is_folder %}
+              <a href="{{ url_for('.conversation_reply', service_id=current_service.id, notification_id=notification_id, from_folder=item.id) }}" class="template-list-folder">
+                <span class="live-search-relevant">{{ item.name }}</span>
+              </a>
+            {% else %}
+              <a href="{{ url_for('.conversation_reply_with_template', service_id=current_service.id, template_id=item.id, notification_id=notification_id) }}">
+                <span class="live-search-relevant">{{ item.name }}</span>
+              </a>
+            {% endif %}
           </h2>
           <p class="message-type">
-            {{ message_count_label(1, template.template_type, suffix='')|capitalize }} template
+            {{ item.hint }}
           </p>
         </div>
       {% endfor %}
     </nav>
+
+
   {% endif %}
 
 {% endblock %}
diff --git a/tests/app/main/views/test_conversation.py b/tests/app/main/views/test_conversation.py
index adbbcae45..ef85c06fc 100644
--- a/tests/app/main/views/test_conversation.py
+++ b/tests/app/main/views/test_conversation.py
@@ -10,10 +10,14 @@ from notifications_python_client.errors import HTTPError
 from app.main.views.conversation import get_user_number
 from tests.conftest import (
     SERVICE_ONE_ID,
+    _template,
     mock_get_notifications,
     normalize_spaces,
 )
 
+INV_PARENT_FOLDER_ID = '7e979e79-d970-43a5-ac69-b625a8d147b0'
+VIS_PARENT_FOLDER_ID = 'bbbb222b-2b22-2b22-222b-b222b22b2222'
+
 
 def test_get_user_phone_number_when_only_inbound_exists(mocker):
 
@@ -255,6 +259,8 @@ def test_conversation_reply_shows_link_to_add_templates_if_service_has_no_templa
     client_request,
     fake_uuid,
     mock_get_service_templates_when_no_templates_exist,
+    mock_get_template_folders,
+    active_user_with_permissions
 ):
     page = client_request.get(
         'main.conversation_reply',
@@ -275,34 +281,68 @@ def test_conversation_reply_shows_link_to_add_templates_if_service_has_no_templa
 def test_conversation_reply_shows_templates(
     client_request,
     fake_uuid,
-    mock_get_service_templates,
+    mocker,
+    mock_get_template_folders,
+    active_user_with_permissions,
+    service_one
 ):
+
+    service_one["permissions"] += ["edit_folder_permissions"]
+    all_templates = {'data': [
+        _template('sms', 'sms_template_one', parent=INV_PARENT_FOLDER_ID),
+        _template('sms', 'sms_template_two'),
+        _template('sms', 'sms_template_three', parent=VIS_PARENT_FOLDER_ID),
+        _template('letter', 'letter_template_one')
+    ]}
+    mocker.patch('app.service_api_client.get_service_templates', return_value=all_templates)
+    mock_get_template_folders.return_value = [
+        {
+            'name': "Parent 1 - invisible",
+            'id': INV_PARENT_FOLDER_ID,
+            'parent_id': None,
+            'users_with_permission': []
+        },
+        {
+            'name': "Parent 2 - visible",
+            'id': VIS_PARENT_FOLDER_ID,
+            'parent_id': None,
+            'users_with_permission': [active_user_with_permissions.id]
+        },
+    ]
     page = client_request.get(
         'main.conversation_reply',
         service_id=SERVICE_ONE_ID,
         notification_id=fake_uuid,
     )
 
-    for index, expected in enumerate([
-        'sms_template_one',
-        'sms_template_two',
-    ]):
-        link = page.select('.message-name')[index]
-        assert normalize_spaces(link.text) == expected
-        assert link.select_one('a')['href'].startswith(
-            url_for(
-                'main.conversation_reply_with_template',
-                service_id=SERVICE_ONE_ID,
-                notification_id=fake_uuid,
-                template_id='',
-            )
+    link = page.select('.template-list-item-without-ancestors')
+    assert normalize_spaces(link[0].text) == "Parent 2 - visible 1 template"
+    assert normalize_spaces(link[1].text) == 'sms_template_two Text message template'
+
+    assert link[0].select_one('a')['href'].startswith(
+        url_for(
+            'main.conversation_reply',
+            service_id=SERVICE_ONE_ID,
+            notification_id=fake_uuid,
+            from_folder=VIS_PARENT_FOLDER_ID
         )
+    )
+
+    assert link[1].select_one('a')['href'].startswith(
+        url_for(
+            'main.conversation_reply_with_template',
+            service_id=SERVICE_ONE_ID,
+            notification_id=fake_uuid,
+            template_id='',
+        )
+    )
 
 
-def test_conversation_reply_shows_live_search_if_list_of_templates_taller_than_screen(
+def test_conversation_reply_shows_live_search(
     client_request,
     fake_uuid,
-    mock_get_more_service_templates_than_can_fit_onscreen,
+    mock_get_service_templates,
+    mock_get_template_folders,
 ):
     page = client_request.get(
         'main.conversation_reply',
@@ -313,20 +353,6 @@ def test_conversation_reply_shows_live_search_if_list_of_templates_taller_than_s
     assert page.select('.live-search')
 
 
-def test_conversation_reply_shows_live_search_if_list_of_templates_fits_onscreen(
-    client_request,
-    fake_uuid,
-    mock_get_service_templates,
-):
-    page = client_request.get(
-        'main.conversation_reply',
-        service_id=SERVICE_ONE_ID,
-        notification_id=fake_uuid,
-    )
-
-    assert not page.select('.live-search')
-
-
 def test_conversation_reply_redirects_with_phone_number_from_notification(
     client_request,
     fake_uuid,
diff --git a/tests/app/main/views/test_template_folders.py b/tests/app/main/views/test_template_folders.py
index d29e0b867..68f465e1e 100644
--- a/tests/app/main/views/test_template_folders.py
+++ b/tests/app/main/views/test_template_folders.py
@@ -7,6 +7,7 @@ from notifications_python_client.errors import HTTPError
 from tests.conftest import (
     SERVICE_ONE_ID,
     TEMPLATE_ONE_ID,
+    _template,
     active_caseworking_user,
     active_user_view_permissions,
     active_user_with_permissions,
@@ -31,15 +32,6 @@ def _folder(name, folder_id=None, parent=None, users_with_permission=None):
     }
 
 
-def _template(template_type, name, parent=None, template_id=None):
-    return {
-        'id': template_id or str(uuid.uuid4()),
-        'name': name,
-        'template_type': template_type,
-        'folder': parent,
-    }
-
-
 @pytest.mark.parametrize(
     (
         'expected_title_tag,'
diff --git a/tests/conftest.py b/tests/conftest.py
index d1274314b..7e96605fe 100644
--- a/tests/conftest.py
+++ b/tests/conftest.py
@@ -3,7 +3,7 @@ import os
 from contextlib import contextmanager
 from datetime import date, datetime, timedelta
 from unittest.mock import Mock
-from uuid import UUID
+from uuid import UUID, uuid4
 
 import pytest
 from bs4 import BeautifulSoup
@@ -986,6 +986,15 @@ def create_service_templates(service_id, number_of_templates=6):
     return {'data': service_templates}
 
 
+def _template(template_type, name, parent=None, template_id=None):
+    return {
+        'id': template_id or str(uuid4()),
+        'name': name,
+        'template_type': template_type,
+        'folder': parent,
+    }
+
+
 @pytest.fixture(scope='function')
 def mock_get_service_templates(mocker):
     def _create(service_id):