Dynamically create Folder (Directory) in selected node of TreeView in ASP.Net

Here I have created sample that full-fill your requirement.

HTML

<div>
    <cc1:ToolkitScriptManager ID="ToolkitScriptManager1" runat="server">
    </cc1:ToolkitScriptManager>
    <asp:TreeView ID="TreeView1" runat="server" ImageSet="XPFileExplorer">
        <HoverNodeStyle Font-Underline="True" ForeColor="#6666AA" />
        <NodeStyle Font-Names="Tahoma" Font-Size="8pt" ForeColor="Black" HorizontalPadding="2px"
            NodeSpacing="0px" VerticalPadding="2px"></NodeStyle>
        <ParentNodeStyle Font-Bold="False" />
        <SelectedNodeStyle BackColor="#B5B5B5" Font-Underline="False" HorizontalPadding="0px"
            VerticalPadding="0px" />
    </asp:TreeView>
    <br />
    <br />
    <cc1:ModalPopupExtender ID="ModalPopupExtender1" BehaviorID="mpe" runat="server"
        PopupControlID="pnlPopup" TargetControlID="btnAddDir" BackgroundCssClass="modalBackground"
        CancelControlID="btnCancel">
    </cc1:ModalPopupExtender>
    <asp:Button ID="btnAddDir" Text="Add Directory" runat="server" />
    <asp:Panel ID="pnlPopup" runat="server" CssClass="modalPopup" Style="display: none;
        width: 30%">
        <div class="header">
            Add Directories
        </div>
        <div class="body">
            <br />
            <asp:TextBox ID="txtDirName" runat="server" />
            <br />
            <br />
            <asp:Button ID="btnAdd" runat="server" Text="Add" OnClick="AddDirectory" />
            <asp:Button ID="btnCancel" runat="server" Text="Cancel" />
        </div>
    </asp:Panel>
</div>

Code

protected void Page_Load(object sender, EventArgs e)
{
    if (!this.IsPostBack)
    {

        TreeView1.Nodes.Add(new TreeNode("C:", "C:"));
        TreeView1.Nodes[0].ChildNodes.Add(new TreeNode("Desktop", "Desktop"));
        TreeView1.Nodes[0].ChildNodes.Add(new TreeNode("Movies", "Movies"));
        TreeView1.Nodes[0].ChildNodes.Add(new TreeNode("Songs", "Songs"));
        TreeView1.Nodes[0].ChildNodes.Add(new TreeNode("Imp", "Imp"));

        TreeView1.Nodes.Add(new TreeNode("D:", "D:"));
        TreeView1.Nodes[1].ChildNodes.Add(new TreeNode("Softwares", "Softwares"));
        TreeView1.Nodes[1].ChildNodes.Add(new TreeNode("Images", "Images"));
        TreeView1.Nodes[1].ChildNodes.Add(new TreeNode("Photos", "Photos"));
        TreeView1.Nodes[1].ChildNodes.Add(new TreeNode("Anrtivirus", "Anrtivirus"));
    }
}

protected void AddDirectory(object sender, EventArgs e)
{
    if (TreeView1.SelectedNode != null)
    {
        if (!string.IsNullOrEmpty(this.txtDirName.Text))
        {
            TreeView1.SelectedNode.ChildNodes.Add(new TreeNode(this.txtDirName.Text.Trim(), this.txtDirName.Text.Trim()));
        }
    }
    else
    {
        this.ClientScript.RegisterStartupScript(typeof(Page), "select", "alert('Please select at least one parent directory')", true);
    }
}

Screenshot