diff --git a/docs/paths.md b/docs/paths.md
index a4437c6..f53cc97 100644
--- a/docs/paths.md
+++ b/docs/paths.md
@@ -180,11 +180,12 @@ A list of paths for the children.
 ### `create_directory`
 
 **Description:**  
-Creates a new directory at the specified path with the given permissions.
+Creates a new directory at the specified path with the given permissions. If
+any of the parent directories do not exist, they will be created as needed.
 
 **Usage:**  
 ```markdown
-create_directory(path: Path, permissions=0o644[32]) -> Void
+create_directory(path: Path, permissions=0o755[32]) -> Void
 ```
 
 **Parameters:**
diff --git a/environment.c b/environment.c
index 96c68c5..385e27b 100644
--- a/environment.c
+++ b/environment.c
@@ -267,7 +267,7 @@ env_t *new_compilation_unit(CORD *libname)
             {"base_name", "Path$base_name", "func(path:Path)->Text"},
             {"by_line", "Path$by_line", "func(path:Path)->(func()->Text?)?"},
             {"children", "Path$children", "func(path:Path, include_hidden=no)->[Path]"},
-            {"create_directory", "Path$create_directory", "func(path:Path, permissions=0o644[32])"},
+            {"create_directory", "Path$create_directory", "func(path:Path, permissions=0o755[32])"},
             {"escape_int", "Int$value_as_text", "func(i:Int)->Path"},
             {"escape_path", "Path$escape_path", "func(path:Path)->Path"},
             {"escape_text", "Path$escape_text", "func(text:Text)->Path"},
diff --git a/stdlib/paths.c b/stdlib/paths.c
index 0122853..0119dbf 100644
--- a/stdlib/paths.c
+++ b/stdlib/paths.c
@@ -322,8 +322,27 @@ public void Path$remove(Path_t path, bool ignore_missing)
 public void Path$create_directory(Path_t path, int permissions)
 {
     path = Path$_expand_home(path);
-    if (mkdir(Text$as_c_string(path), (mode_t)permissions) != 0)
-        fail("Could not create directory: %k (%s)", &path, strerror(errno));
+    char *c_path = Text$as_c_string(path);
+    char *end = c_path + strlen(c_path);
+    if (*end == '/' && end > c_path) {
+        *end = '\0';
+        --end;
+    }
+    char *end_of_component = strchrnul(c_path + 1, '/');
+    for (;;) {
+        if (end_of_component < end)
+            *end_of_component = '\0';
+
+        int status = mkdir(c_path, (mode_t)permissions);
+        if (status != 0 && errno != EEXIST)
+            fail("Could not create directory: %s (%s)", c_path, strerror(errno));
+
+        if (end_of_component >= end)
+            break;
+
+        *end_of_component = '/';
+        end_of_component = strchrnul(end_of_component + 1, '/');
+    }
 }
 
 static Array_t _filtered_children(Path_t path, bool include_hidden, mode_t filter)