diff --git a/.changeset/crazy-hands-film.md b/.changeset/crazy-hands-film.md
new file mode 100644
index 0000000000..694aa7b8e7
--- /dev/null
+++ b/.changeset/crazy-hands-film.md
@@ -0,0 +1,5 @@
+---
+'@backstage/plugin-scaffolder-backend-module-gitlab': patch
+---
+
+Updated the path field in the `gitlab:group:ensureExists` action to suport also strings with multiple segments (e.g. group/subgroup)
diff --git a/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.examples.test.ts b/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.examples.test.ts
index eaeb65ae9c..4d8e0fd0c0 100644
--- a/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.examples.test.ts
+++ b/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.examples.test.ts
@@ -243,4 +243,55 @@ describe('gitlab:group:ensureExists', () => {
 
     expect(mockContext.output).toHaveBeenCalledWith('groupId', 3);
   });
+
+  it(`Should ${examples[5].description}`, async () => {
+    mockGitlabClient.Groups.search.mockResolvedValue([
+      {
+        id: 1,
+        full_path: 'group1',
+      },
+      {
+        id: 2,
+        full_path: 'group1/group2',
+      },
+      {
+        id: 3,
+        full_path: 'group1/group2/group3',
+      },
+    ]);
+    mockGitlabClient.Groups.create.mockResolvedValue({
+      id: 4,
+      full_path: 'group1/group2/group3/group4',
+    });
+
+    const config = new ConfigReader({
+      integrations: {
+        gitlab: [
+          {
+            host: 'gitlab.com',
+            token: 'tokenlols',
+            apiBaseUrl: 'https://api.gitlab.com',
+          },
+        ],
+      },
+    });
+    const integrations = ScmIntegrations.fromConfig(config);
+
+    const action = createGitlabGroupEnsureExistsAction({ integrations });
+
+    await action.handler({
+      ...mockContext,
+      input: yaml.parse(examples[5].example).steps[0].input,
+    });
+
+    expect(mockGitlabClient.Groups.create).toHaveBeenCalledWith(
+      'Group 4',
+      'group4',
+      {
+        parentId: 3,
+      },
+    );
+
+    expect(mockContext.output).toHaveBeenCalledWith('groupId', 4);
+  });
 });
diff --git a/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.examples.ts b/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.examples.ts
index bbe7ad4722..f379bd38ec 100644
--- a/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.examples.ts
+++ b/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.examples.ts
@@ -102,4 +102,25 @@ export const examples: TemplateExample[] = [
       ],
     }),
   },
+  {
+    description:
+      'Create a group nested within another group using path and objects',
+    example: yaml.stringify({
+      steps: [
+        {
+          id: 'gitlabGroup',
+          name: 'Group',
+          action: 'gitlab:group:ensureExists',
+          input: {
+            repoUrl: 'gitlab.com',
+            path: [
+              'group1/group2',
+              { name: 'Group 3', slug: 'group3' },
+              { name: 'Group 4', slug: 'group4' },
+            ],
+          },
+        },
+      ],
+    }),
+  },
 ];
diff --git a/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.test.ts b/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.test.ts
index f9dc12eb54..3d703eb91f 100644
--- a/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.test.ts
+++ b/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.test.ts
@@ -94,6 +94,38 @@ describe('gitlab:group:ensureExists', () => {
     expect(mockContext.output).toHaveBeenCalledWith('groupId', 3);
   });
 
+  it('should create a new group from pathstring if it does not exists', async () => {
+    mockGitlabClient.Groups.search.mockResolvedValue([
+      {
+        id: 1,
+        full_path: 'bar',
+      },
+      {
+        id: 2,
+        full_path: 'foo',
+      },
+    ]);
+
+    mockGitlabClient.Groups.create.mockResolvedValue({
+      id: 3,
+      full_path: 'foo/bar',
+    });
+
+    await action.handler({
+      ...mockContext,
+      input: {
+        repoUrl: 'gitlab.com?repo=repo&owner=owner',
+        path: ['foo/bar', 'baz'],
+      },
+    });
+
+    expect(mockGitlabClient.Groups.create).toHaveBeenCalledWith('bar', 'bar', {
+      parentId: 2,
+    });
+
+    expect(mockContext.output).toHaveBeenCalledWith('groupId', 3);
+  });
+
   it('should create a new group from object if it does not exists', async () => {
     mockGitlabClient.Groups.search.mockResolvedValue([
       {
diff --git a/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.ts b/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.ts
index 5be5b7c10d..7e5b03ce04 100644
--- a/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.ts
+++ b/plugins/scaffolder-backend-module-gitlab/src/actions/gitlabGroupEnsureExists.ts
@@ -76,11 +76,7 @@ export const createGitlabGroupEnsureExistsAction = (options: {
 
       let currentPath: string | null = null;
       let parentId: number | null = null;
-      for (const pathElement of path) {
-        const slug =
-          typeof pathElement === 'string' ? pathElement : pathElement.slug;
-        const name =
-          typeof pathElement === 'string' ? pathElement : pathElement.name;
+      for (const { name, slug } of pathIterator(path)) {
         const fullPath: string = currentPath ? `${currentPath}/${slug}` : slug;
         const result = (await api.Groups.search(
           fullPath,
@@ -119,3 +115,19 @@ export const createGitlabGroupEnsureExistsAction = (options: {
     },
   });
 };
+
+type PathPart = { name: string; slug: string };
+type PathItem = string | PathPart;
+
+function* pathIterator(items: PathItem[]): Generator<PathPart> {
+  for (const item of items) {
+    if (typeof item === 'string') {
+      const parts = item.split('/');
+      for (const part of parts) {
+        yield { name: part, slug: part };
+      }
+    } else {
+      yield item;
+    }
+  }
+}