Sharepoint - Not able to create Folder within document library OOB Office 365

Notes: If the New Folder command is not available, you can turn it back on with the proper permissions.

On the Library tab of the ribbon, click Library Settings, and then click Advanced settings.

In the Folder section, make sure that the Yes option is selected for Make "New Folder" command available.

Click OK.

Source: https://support.office.com/en-us/article/create-a-folder-in-a-document-library-3d6a8c11-2490-4d6b-8837-f25649a69c56

I know the link is for 2010, but the steps should be similar

Issue got solved.

Whenever User has full control with Limited access permission, then he doesn't have permission to create or upload folders in a document library, so for that we need to enable "Contribute permission" for particular user to avoid restrictions on document library.

This solved my issue.

Thanks