diff --git a/.coveragerc b/.coveragerc
index a2c0dde77b1..d6cc126ef52 100644
--- a/.coveragerc
+++ b/.coveragerc
@@ -402,6 +402,7 @@ omit =
     homeassistant/components/fan/mqtt.py
     homeassistant/components/fan/xiaomi_miio.py
     homeassistant/components/feedreader.py
+    homeassistant/components/folder_watcher.py
     homeassistant/components/foursquare.py
     homeassistant/components/goalfeed.py
     homeassistant/components/ifttt.py
diff --git a/homeassistant/components/folder_watcher.py b/homeassistant/components/folder_watcher.py
new file mode 100644
index 00000000000..011ae892bc5
--- /dev/null
+++ b/homeassistant/components/folder_watcher.py
@@ -0,0 +1,111 @@
+"""
+Component for monitoring activity on a folder.
+
+For more details about this platform, refer to the documentation at
+https://home-assistant.io/components/folder_watcher/
+"""
+import os
+import logging
+import voluptuous as vol
+from homeassistant.const import (
+    EVENT_HOMEASSISTANT_START, EVENT_HOMEASSISTANT_STOP)
+import homeassistant.helpers.config_validation as cv
+
+REQUIREMENTS = ['watchdog==0.8.3']
+_LOGGER = logging.getLogger(__name__)
+
+CONF_FOLDER = 'folder'
+CONF_PATTERNS = 'patterns'
+CONF_WATCHERS = 'watchers'
+DEFAULT_PATTERN = '*'
+DOMAIN = "folder_watcher"
+
+CONFIG_SCHEMA = vol.Schema({
+    DOMAIN: vol.All(cv.ensure_list, [vol.Schema({
+        vol.Required(CONF_FOLDER): cv.isdir,
+        vol.Optional(CONF_PATTERNS, default=[DEFAULT_PATTERN]):
+            vol.All(cv.ensure_list, [cv.string]),
+    })])
+}, extra=vol.ALLOW_EXTRA)
+
+
+def setup(hass, config):
+    """Set up the folder watcher."""
+    conf = config[DOMAIN]
+    for watcher in conf:
+        path = watcher[CONF_FOLDER]
+        patterns = watcher[CONF_PATTERNS]
+        if not hass.config.is_allowed_path(path):
+            _LOGGER.error("folder %s is not valid or allowed", path)
+            return False
+        Watcher(path, patterns, hass)
+
+    return True
+
+
+def create_event_handler(patterns, hass):
+    """"Return the Watchdog EventHandler object."""
+    from watchdog.events import PatternMatchingEventHandler
+
+    class EventHandler(PatternMatchingEventHandler):
+        """Class for handling Watcher events."""
+
+        def __init__(self, patterns, hass):
+            """Initialise the EventHandler."""
+            super().__init__(patterns)
+            self.hass = hass
+
+        def process(self, event):
+            """On Watcher event, fire HA event."""
+            _LOGGER.debug("process(%s)", event)
+            if not event.is_directory:
+                folder, file_name = os.path.split(event.src_path)
+                self.hass.bus.fire(
+                    DOMAIN, {
+                        "event_type": event.event_type,
+                        'path': event.src_path,
+                        'file': file_name,
+                        'folder': folder,
+                        })
+
+        def on_modified(self, event):
+            """File modified."""
+            self.process(event)
+
+        def on_moved(self, event):
+            """File moved."""
+            self.process(event)
+
+        def on_created(self, event):
+            """File created."""
+            self.process(event)
+
+        def on_deleted(self, event):
+            """File deleted."""
+            self.process(event)
+
+    return EventHandler(patterns, hass)
+
+
+class Watcher():
+    """Class for starting Watchdog."""
+
+    def __init__(self, path, patterns, hass):
+        """Initialise the watchdog observer."""
+        from watchdog.observers import Observer
+        self._observer = Observer()
+        self._observer.schedule(
+            create_event_handler(patterns, hass),
+            path,
+            recursive=True)
+        hass.bus.listen_once(EVENT_HOMEASSISTANT_START, self.startup)
+        hass.bus.listen_once(EVENT_HOMEASSISTANT_STOP, self.shutdown)
+
+    def startup(self, event):
+        """Start the watcher."""
+        self._observer.start()
+
+    def shutdown(self, event):
+        """Shutdown the watcher."""
+        self._observer.stop()
+        self._observer.join()
diff --git a/requirements_all.txt b/requirements_all.txt
index e79249151b1..d983028cead 100644
--- a/requirements_all.txt
+++ b/requirements_all.txt
@@ -1279,6 +1279,9 @@ waqiasync==1.0.0
 # homeassistant.components.cloud
 warrant==0.6.1
 
+# homeassistant.components.folder_watcher
+watchdog==0.8.3
+
 # homeassistant.components.waterfurnace
 waterfurnace==0.4.0
 
diff --git a/requirements_test_all.txt b/requirements_test_all.txt
index e8a57488d80..6630c09c1c4 100644
--- a/requirements_test_all.txt
+++ b/requirements_test_all.txt
@@ -199,5 +199,8 @@ wakeonlan==1.0.0
 # homeassistant.components.cloud
 warrant==0.6.1
 
+# homeassistant.components.folder_watcher
+watchdog==0.8.3
+
 # homeassistant.components.sensor.yahoo_finance
 yahoo-finance==1.4.0
diff --git a/script/gen_requirements_all.py b/script/gen_requirements_all.py
index d8fc7b1ed60..1f5348136c6 100755
--- a/script/gen_requirements_all.py
+++ b/script/gen_requirements_all.py
@@ -90,6 +90,7 @@ TEST_REQUIREMENTS = (
     'yahoo-finance',
     'pythonwhois',
     'wakeonlan',
+    'watchdog',
     'vultr'
 )
 
diff --git a/tests/components/test_folder_watcher.py b/tests/components/test_folder_watcher.py
new file mode 100644
index 00000000000..587d8b7ad6d
--- /dev/null
+++ b/tests/components/test_folder_watcher.py
@@ -0,0 +1,64 @@
+"""The tests for the folder_watcher component."""
+import unittest
+from unittest.mock import MagicMock
+import os
+
+from homeassistant.components import folder_watcher
+from homeassistant.setup import setup_component
+from tests.common import get_test_home_assistant
+
+CWD = os.path.join(os.path.dirname(__file__))
+FILE = 'file.txt'
+
+
+class TestFolderWatcher(unittest.TestCase):
+    """Test the file_watcher component."""
+
+    def setup_method(self, method):
+        """Set up things to be run when tests are started."""
+        self.hass = get_test_home_assistant()
+        self.hass.config.whitelist_external_dirs = set((CWD))
+
+    def teardown_method(self, method):
+        """Stop everything that was started."""
+        self.hass.stop()
+
+    def test_invalid_path_setup(self):
+        """Test that a invalid path is not setup."""
+        config = {
+            folder_watcher.DOMAIN: [{
+                folder_watcher.CONF_FOLDER: 'invalid_path'
+                }]
+        }
+        self.assertFalse(
+            setup_component(self.hass, folder_watcher.DOMAIN, config))
+
+    def test_valid_path_setup(self):
+        """Test that a valid path is setup."""
+        config = {
+            folder_watcher.DOMAIN: [{folder_watcher.CONF_FOLDER: CWD}]
+        }
+
+        self.assertTrue(setup_component(
+            self.hass, folder_watcher.DOMAIN, config))
+
+    def test_event(self):
+        """Check that HASS events are fired correctly on watchdog event."""
+        from watchdog.events import FileModifiedEvent
+
+        # Cant use setup_component as need to retrieve Watcher object.
+        w = folder_watcher.Watcher(CWD,
+                                   folder_watcher.DEFAULT_PATTERN,
+                                   self.hass)
+        w.startup(None)
+
+        self.hass.bus.fire = MagicMock()
+
+        # Trigger a fake filesystem event through the Watcher Observer emitter.
+        (emitter,) = w._observer.emitters
+        emitter.queue_event(FileModifiedEvent(FILE))
+
+        # Wait for the event to propagate.
+        self.hass.block_till_done()
+
+        assert self.hass.bus.fire.called