diff --git a/vscode/microsoft-kiota/CHANGELOG.md b/vscode/microsoft-kiota/CHANGELOG.md
index 3c530e5d9f..4d80c21cb0 100644
--- a/vscode/microsoft-kiota/CHANGELOG.md
+++ b/vscode/microsoft-kiota/CHANGELOG.md
@@ -11,6 +11,7 @@ All notable changes to this project will be documented in this file.
 ### Changed
 
 - Fixed a bug in the VS Code extension deeplink with the API Center extension [#6004](https://github.com/microsoft/kiota/issues/6004)
+- Use a subdirectory in the output path when generating clients [#5977](https://github.com/microsoft/kiota/issues/5977)
 
 ## [1.22.100000001] - 2025-01-10
 
diff --git a/vscode/microsoft-kiota/src/commands/generate/generateClientCommand.ts b/vscode/microsoft-kiota/src/commands/generate/generateClientCommand.ts
index 849426bdf5..ea200aa57c 100644
--- a/vscode/microsoft-kiota/src/commands/generate/generateClientCommand.ts
+++ b/vscode/microsoft-kiota/src/commands/generate/generateClientCommand.ts
@@ -22,6 +22,7 @@ import { generateClient } from "./generateClient";
 import { generatePlugin } from "./generatePlugin";
 import { displayGenerationResults } from "./generation-util";
 import { getLanguageInformation, getLanguageInformationForDescription } from "./getLanguageInformation";
+import { confirmDeletionOnCleanOutput } from "../../utilities/generation";
 
 export class GenerateClientCommand extends Command {
 
@@ -66,6 +67,11 @@ export class GenerateClientCommand extends Command {
         pluginName
       };
     }
+    const settings = getExtensionSettings(extensionId);
+    if (settings.cleanOutput && !(await confirmDeletionOnCleanOutput())) {
+      // cancel generation and open settings
+      return vscode.commands.executeCommand('workbench.action.openSettings', 'kiota.cleanOutput.enabled');
+    }
     let config = await generateSteps(
       availableStateInfo,
       languagesInformation,
@@ -101,7 +107,6 @@ export class GenerateClientCommand extends Command {
       return;
     }
 
-    const settings = getExtensionSettings(extensionId);
     this._setWorkspaceGenerationContext({ generationType: config.generationType as string });
     let result;
     switch (generationType) {
diff --git a/vscode/microsoft-kiota/src/commands/regenerate/regenerate.service.ts b/vscode/microsoft-kiota/src/commands/regenerate/regenerate.service.ts
index b9ca84c3ed..79939712cf 100644
--- a/vscode/microsoft-kiota/src/commands/regenerate/regenerate.service.ts
+++ b/vscode/microsoft-kiota/src/commands/regenerate/regenerate.service.ts
@@ -40,8 +40,8 @@ export class RegenerateService {
         this._clientKey,
         clientObjectItem.clientNamespaceName,
         clientObjectItem.usesBackingStore ? clientObjectItem.usesBackingStore : settings.backingStore,
-        true, // clearCache
-        true, // cleanOutput
+        settings.clearCache,
+        settings.cleanOutput,
         clientObjectItem.excludeBackwardCompatible ? clientObjectItem.excludeBackwardCompatible : settings.excludeBackwardCompatible,
         clientObjectItem.disabledValidationRules ? clientObjectItem.disabledValidationRules : settings.disableValidationRules,
         settings.languagesSerializationConfiguration[language].serializers,
diff --git a/vscode/microsoft-kiota/src/commands/regenerate/regenerateButtonCommand.ts b/vscode/microsoft-kiota/src/commands/regenerate/regenerateButtonCommand.ts
index 7319264b44..8045522017 100644
--- a/vscode/microsoft-kiota/src/commands/regenerate/regenerateButtonCommand.ts
+++ b/vscode/microsoft-kiota/src/commands/regenerate/regenerateButtonCommand.ts
@@ -7,7 +7,8 @@ import { OpenApiTreeProvider } from "../../providers/openApiTreeProvider";
 import { getExtensionSettings } from "../../types/extensionSettings";
 import { WorkspaceGenerationContext } from "../../types/WorkspaceGenerationContext";
 import { isClientType, isPluginType } from "../../util";
-import { confirmOverride } from "../../utilities/regeneration";
+import { confirmDeletionOnCleanOutput } from "../../utilities/generation";
+import { confirmOverwriteOnRegenerate } from "../../utilities/regeneration";
 import { Command } from "../Command";
 import { RegenerateService } from "./regenerate.service";
 
@@ -23,8 +24,14 @@ export class RegenerateButtonCommand extends Command {
 
   public async execute({ generationType, clientOrPluginKey, clientOrPluginObject }: WorkspaceGenerationContext): Promise<void> {
     const configuration = getGenerationConfiguration();
-    const regenerate = await confirmOverride();
-    if (!regenerate) {
+    const settings = getExtensionSettings(extensionId);
+    if (settings.cleanOutput) {
+      const accept = await confirmDeletionOnCleanOutput();
+      if (!accept) {
+        // cancel generation and open settings
+        return vscode.commands.executeCommand('workbench.action.openSettings', 'kiota.cleanOutput.enabled');
+      }
+    } else if (!(await confirmOverwriteOnRegenerate())) {
       return;
     }
 
@@ -39,7 +46,6 @@ export class RegenerateButtonCommand extends Command {
       });
     }
 
-    const settings = getExtensionSettings(extensionId);
     const selectedPaths = this._openApiTreeProvider.getSelectedPaths();
     if (selectedPaths.length === 0) {
       await vscode.window.showErrorMessage(
diff --git a/vscode/microsoft-kiota/src/commands/regenerate/regenerateCommand.ts b/vscode/microsoft-kiota/src/commands/regenerate/regenerateCommand.ts
index c4c0d673fc..69f50888fe 100644
--- a/vscode/microsoft-kiota/src/commands/regenerate/regenerateCommand.ts
+++ b/vscode/microsoft-kiota/src/commands/regenerate/regenerateCommand.ts
@@ -6,7 +6,8 @@ import { OpenApiTreeProvider } from "../../providers/openApiTreeProvider";
 import { getExtensionSettings } from "../../types/extensionSettings";
 import { WorkspaceGenerationContext } from "../../types/WorkspaceGenerationContext";
 import { isClientType, isPluginType } from "../../util";
-import { confirmOverride } from "../../utilities/regeneration";
+import { confirmDeletionOnCleanOutput } from "../../utilities/generation";
+import { confirmOverwriteOnRegenerate } from "../../utilities/regeneration";
 import { Command } from "../Command";
 import { RegenerateService } from "./regenerate.service";
 
@@ -21,12 +22,17 @@ export class RegenerateCommand extends Command {
   }
 
   public async execute({ generationType, clientOrPluginKey, clientOrPluginObject }: WorkspaceGenerationContext): Promise<void> {
-    const regenerate = await confirmOverride();
-    if (!regenerate) {
+    const settings = getExtensionSettings(extensionId);
+    if (settings.cleanOutput) {
+      const accept = await confirmDeletionOnCleanOutput();
+      if (!accept) {
+        // cancel generation and open settings
+        return vscode.commands.executeCommand('workbench.action.openSettings', 'kiota.cleanOutput.enabled');
+      }
+    } else if (!(await confirmOverwriteOnRegenerate())) {
       return;
     }
 
-    const settings = getExtensionSettings(extensionId);
     const workspaceJson = vscode.workspace.textDocuments.find(doc => doc.fileName.endsWith(KIOTA_WORKSPACE_FILE));
     if (workspaceJson && workspaceJson.isDirty) {
       await vscode.window.showInformationMessage(
@@ -46,6 +52,6 @@ export class RegenerateCommand extends Command {
         await regenerateService.regenerateTeamsApp(workspaceJson, clientOrPluginKey);
       }
     }
-    await vscode.commands.executeCommand('kiota.workspace.refresh'); 
+    await vscode.commands.executeCommand('kiota.workspace.refresh');
   }
 }
\ No newline at end of file
diff --git a/vscode/microsoft-kiota/src/modules/steps/generateSteps.ts b/vscode/microsoft-kiota/src/modules/steps/generateSteps.ts
index e26c457efa..38d0ef09cc 100644
--- a/vscode/microsoft-kiota/src/modules/steps/generateSteps.ts
+++ b/vscode/microsoft-kiota/src/modules/steps/generateSteps.ts
@@ -52,18 +52,18 @@ export async function generateSteps(existingConfiguration: Partial<GenerateState
 
   let step = 1;
   const folderSelectionOption = l10n.t('Browse your output directory');
-  let inputOptions = [
-    { label: l10n.t('Default folder'), description: workspaceFolder },
-    { label: folderSelectionOption }
-  ];
+
+  function getOutputPath(workspaceFolder: string, clientName: string) {
+    const outputPath = path.join(workspaceFolder, clientName);
+    return [
+      { label: l10n.t('Default folder'), description: outputPath },
+      { label: folderSelectionOption }
+    ];
+  }
 
   function updateWorkspaceFolder(name: string | undefined) {
     if (name && (!workspaceOpen)) {
       workspaceFolder = getWorkspaceJsonDirectory(name);
-      inputOptions = [
-        { label: l10n.t('Default folder'), description: workspaceFolder },
-        { label: folderSelectionOption }
-      ];
     }
   }
   function getNextStepForGenerationType(generationType: string | QuickPickItem) {
@@ -143,7 +143,7 @@ export async function generateSteps(existingConfiguration: Partial<GenerateState
         step: step++,
         totalSteps: 5,
         placeholder: l10n.t('Enter an output path relative to the root of the project'),
-        items: inputOptions,
+        items: getOutputPath(workspaceFolder, state.clientClassName!),
         shouldResume: shouldResume
       });
       if (selectedOption) {
@@ -241,7 +241,7 @@ export async function generateSteps(existingConfiguration: Partial<GenerateState
         step: step++,
         totalSteps: 4,
         placeholder: l10n.t('Enter an output path relative to the root of the project'),
-        items: inputOptions,
+        items: getOutputPath(workspaceFolder, state.clientClassName!),
         shouldResume: shouldResume
       });
       if (selectedOption) {
@@ -297,7 +297,7 @@ export async function generateSteps(existingConfiguration: Partial<GenerateState
         step: step++,
         totalSteps: 4,
         placeholder: l10n.t('Enter an output path relative to the root of the project'),
-        items: inputOptions,
+        items: getOutputPath(workspaceFolder, state.clientClassName!),
         shouldResume: shouldResume
       });
       if (selectedOption) {
diff --git a/vscode/microsoft-kiota/src/utilities/generation.ts b/vscode/microsoft-kiota/src/utilities/generation.ts
new file mode 100644
index 0000000000..5dc4684441
--- /dev/null
+++ b/vscode/microsoft-kiota/src/utilities/generation.ts
@@ -0,0 +1,12 @@
+import {l10n, window} from "vscode";
+
+
+export async function confirmDeletionOnCleanOutput(): Promise<boolean> {
+  const yesAnswer = l10n.t("Yes, proceed");
+  const noAnswer = l10n.t("Change configuration");
+  const message = l10n.t("All existing files in the output directory are going to be deleted.");
+  const confirmation = await window.showWarningMessage(
+    message, yesAnswer, noAnswer
+  );
+  return confirmation === yesAnswer;
+}
diff --git a/vscode/microsoft-kiota/src/utilities/regeneration.ts b/vscode/microsoft-kiota/src/utilities/regeneration.ts
index 5a8f8a775d..1e2ec2d47a 100644
--- a/vscode/microsoft-kiota/src/utilities/regeneration.ts
+++ b/vscode/microsoft-kiota/src/utilities/regeneration.ts
@@ -1,6 +1,6 @@
 import * as vscode from "vscode";
 
-export async function confirmOverride(): Promise<boolean> {
+export async function confirmOverwriteOnRegenerate(): Promise<boolean> {
   const yesAnswer = vscode.l10n.t("Yes, override it");
   const confirmation = await vscode.window
     .showWarningMessage(
@@ -9,4 +9,4 @@ export async function confirmOverride(): Promise<boolean> {
       vscode.l10n.t("Cancel")
     );
   return confirmation === yesAnswer;
-}
\ No newline at end of file
+}