diff --git a/doc/muxers.texi b/doc/muxers.texi
index 6af970d..2951262 100644
--- a/doc/muxers.texi
+++ b/doc/muxers.texi
@@ -587,6 +587,20 @@ This example will produce the playlists segment file sets:
 @file{file_0_000.ts}, @file{file_0_001.ts}, @file{file_0_002.ts}, etc. and
 @file{file_1_000.ts}, @file{file_1_001.ts}, @file{file_1_002.ts}, etc.
 
+The string "%v" may be present in the filename or in the last directory name
+containing the file. If the string is present in the directory name, then
+sub-directories are created after expanding the directory name pattern. This
+enables creation of segments corresponding to different variant streams in
+subdirectories.
+@example
+ffmpeg -i in.ts -b:v:0 1000k -b:v:1 256k -b:a:0 64k -b:a:1 32k \
+  -map 0:v -map 0:a -map 0:v -map 0:a -f hls -var_stream_map "v:0,a:0 v:1,a:1" \
+  -hls_segment_filename 'vs%v/file_%03d.ts' vs%v/out.m3u8
+@end example
+This example will produce the playlists segment file sets:
+@file{vs0/file_000.ts}, @file{vs0/file_001.ts}, @file{vs0/file_002.ts}, etc. and
+@file{vs1/file_000.ts}, @file{vs1/file_001.ts}, @file{vs1/file_002.ts}, etc.
+
 @item use_localtime
 Use strftime() on @var{filename} to expand the segment filename with localtime.
 The segment number is also available in this mode, but to use it, you need to specify second_level_segment_index
@@ -715,6 +729,11 @@ set filename to the fragment files header file, default filename is @file{init.m
 When @code{var_stream_map} is set with two or more variant streams, the
 @var{filename} pattern must contain the string "%v", this string specifies
 the position of variant stream index in the generated init file names.
+The string "%v" may be present in the filename or in the last directory name
+containing the file. If the string is present in the directory name, then
+sub-directories are created after expanding the directory name pattern. This
+enables creation of init files corresponding to different variant streams in
+subdirectories.
 
 @item hls_flags @var{flags}
 Possible values:
@@ -831,7 +850,11 @@ Allowed values are 0 to 9 (limited just based on practical usage).
 
 When there are two or more variant streams, the output filename pattern must
 contain the string "%v", this string specifies the position of variant stream
-index in the output media playlist filenames.
+index in the output media playlist filenames. The string "%v" may be present in
+the filename or in the last directory name containing the file. If the string is
+present in the directory name, then sub-directories are created after expanding
+the directory name pattern. This enables creation of variant streams in
+subdirectories.
 
 @example
 ffmpeg -re -i in.ts -b:v:0 1000k -b:v:1 256k -b:a:0 64k -b:a:1 32k \
@@ -854,6 +877,14 @@ be an audio only stream with bitrate 64k and the third variant stream will be a
 video only stream with bitrate 256k. Here, three media playlist with file names
 out_0.m3u8, out_1.m3u8 and out_2.m3u8 will be created.
 @example
+ffmpeg -re -i in.ts -b:v:0 1000k -b:v:1 256k -b:a:0 64k -b:a:1 32k \
+  -map 0:v -map 0:a -map 0:v -map 0:a -f hls -var_stream_map "v:0,a:0 v:1,a:1" \
+  http://example.com/live/vs_%v/out.m3u8
+@end example
+This example creates the variant streams in subdirectories. Here, the first
+media playlist is created at @file{http://example.com/live/vs_0/out.m3u8} and
+the second one at @file{http://example.com/live/vs_1/out.m3u8}.
+@example
 ffmpeg -re -i in.ts -b:a:0 32k -b:a:1 64k -b:v:0 1000k -b:v:1 3000k  \
   -map 0:a -map 0:a -map 0:v -map 0:v -f hls \
   -var_stream_map "a:0,agroup:aud_low a:1,agroup:aud_high v:0,agroup:aud_low v:1,agroup:aud_high" \
diff --git a/libavformat/hlsenc.c b/libavformat/hlsenc.c
index 76a4110..9e1a267 100644
--- a/libavformat/hlsenc.c
+++ b/libavformat/hlsenc.c
@@ -1557,7 +1557,8 @@ static int append_postfix(char *name, int name_buf_len, int i)
 
 static int validate_name(int nb_vs, const char *fn)
 {
-    const char *filename;
+    const char *filename, *subdir_name;
+    char *fn_dup = NULL;
     int ret = 0;
 
     if (!fn) {
@@ -1565,22 +1566,38 @@ static int validate_name(int nb_vs, const char *fn)
         goto fail;
     }
 
+    fn_dup = av_strdup(fn);
+    if (!fn_dup) {
+        ret = AVERROR(ENOMEM);
+        goto fail;
+    }
+
     filename = av_basename(fn);
+    subdir_name = av_dirname(fn_dup);
 
-    if (nb_vs > 1 && !av_stristr(filename, "%v")) {
+    if (nb_vs > 1 && !av_stristr(filename, "%v") && !av_stristr(subdir_name, "%v")) {
         av_log(NULL, AV_LOG_ERROR, "More than 1 variant streams are present, %%v is expected in the filename %s\n",
                 fn);
         ret = AVERROR(EINVAL);
         goto fail;
     }
 
+    if (av_stristr(filename, "%v") && av_stristr(subdir_name, "%v")) {
+        av_log(NULL, AV_LOG_ERROR, "%%v is expected either in filename or in the sub-directory name of file %s\n",
+                fn);
+        ret = AVERROR(EINVAL);
+        goto fail;
+    }
+
 fail:
+    av_freep(&fn_dup);
     return ret;
 }
 
 static int format_name(char *buf, int buf_len, int index)
 {
-    char *orig_buf_dup = NULL;
+    const char *proto, *dir;
+    char *orig_buf_dup = NULL, *mod_buf_dup = NULL;
     int ret = 0;
 
     if (!av_stristr(buf, "%v"))
@@ -1597,8 +1614,27 @@ static int format_name(char *buf, int buf_len, int index)
         goto fail;
     }
 
+    proto = avio_find_protocol_name(orig_buf_dup);
+    dir = av_dirname(orig_buf_dup);
+
+    /* if %v is present in the file's directory, create sub-directory */
+    if (av_stristr(dir, "%v") && proto && !strcmp(proto, "file")) {
+        mod_buf_dup = av_strdup(buf);
+        if (!mod_buf_dup) {
+            ret = AVERROR(ENOMEM);
+            goto fail;
+        }
+
+        dir = av_dirname(mod_buf_dup);
+        if (mkdir_p(dir) == -1 && errno != EEXIST) {
+            ret = AVERROR(errno);
+            goto fail;
+        }
+    }
+
 fail:
     av_freep(&orig_buf_dup);
+    av_freep(&mod_buf_dup);
     return ret;
 }
 
@@ -1745,16 +1781,30 @@ static int update_variant_stream_info(AVFormatContext *s) {
 static int update_master_pl_info(AVFormatContext *s) {
     HLSContext *hls = s->priv_data;
     const char *dir;
-    char *fn = NULL;
+    char *fn1= NULL, *fn2 = NULL;
     int ret = 0;
 
-    fn = av_strdup(s->filename);
-    if (!fn) {
+    fn1 = av_strdup(s->filename);
+    if (!fn1) {
         ret = AVERROR(ENOMEM);
         goto fail;
     }
 
-    dir = av_dirname(fn);
+    dir = av_dirname(fn1);
+
+    /**
+     * if output file's directory has %v, variants are created in sub-directories
+     * then master is created at the sub-directories level
+     */
+    if (dir && av_stristr(av_basename(dir), "%v")) {
+        fn2 = av_strdup(dir);
+        if (!fn2) {
+            ret = AVERROR(ENOMEM);
+            goto fail;
+        }
+        dir = av_dirname(fn2);
+    }
+
     if (dir && strcmp(dir, "."))
         hls->master_m3u8_url = av_append_path_component(dir, hls->master_pl_name);
     else
@@ -1766,7 +1816,9 @@ static int update_master_pl_info(AVFormatContext *s) {
     }
 
 fail:
-    av_freep(&fn);
+    av_freep(&fn1);
+    av_freep(&fn2);
+
     return ret;
 }
 
