diff --git a/src/NewProject.res b/src/NewProject.res
index 37848bb..e1a968e 100644
--- a/src/NewProject.res
+++ b/src/NewProject.res
@@ -2,19 +2,6 @@ open Node
 
 module P = ClackPrompts
 
-let packageNameRegExp = /^[a-z0-9-]+$/
-
-let validateProjectName = projectName =>
-  if projectName->String.trim->String.length === 0 {
-    Error("Project name must not be empty.")
-  } else if !(packageNameRegExp->RegExp.test(projectName)) {
-    Error("Project name may only contain lower case letters, numbers and hyphens.")
-  } else if Fs.existsSync(Path.join2(Process.cwd(), projectName)) {
-    Error(`The folder ${projectName} already exist in the current directory.`)
-  } else {
-    Ok()
-  }
-
 let updatePackageJson = async (~projectName, ~versions) =>
   await JsonUtils.updateJsonFile("package.json", json =>
     switch json {
@@ -159,7 +146,7 @@ let createNewProject = async () => {
     let projectName = switch commandLineArguments.projectName {
     | Some(projectName) if useDefaultVersions =>
       // Note this throws in the some case, which is why we cannot use Option.getOrThrow here.
-      switch validateProjectName(projectName) {
+      switch NewProjectValidation.validateProjectName(projectName) {
       | Error(message) => JsError.throwWithMessage(message)
       | Ok() => projectName
       }
@@ -170,7 +157,7 @@ let createNewProject = async () => {
         placeholder: "my-rescript-app",
         ?initialValue,
         validate: projectName =>
-          switch validateProjectName(projectName) {
+          switch NewProjectValidation.validateProjectName(projectName) {
           | Ok() => None
           | Error(error) => Some(error)
           },
diff --git a/src/NewProjectValidation.res b/src/NewProjectValidation.res
new file mode 100644
index 0000000..0d37a74
--- /dev/null
+++ b/src/NewProjectValidation.res
@@ -0,0 +1,30 @@
+open Node
+
+let packageNameRegExp = /^[a-z0-9-]+$/
+let devcontainerDirectoryName = ".devcontainer"
+
+let containsOnlyDevcontainerDirectory = projectPath =>
+  try {
+    switch Fs.readdirSync(projectPath) {
+    | [entry] if entry === devcontainerDirectoryName =>
+      Path.join2(projectPath, devcontainerDirectoryName)->Fs.statSync->Fs.Stats.isDirectory
+    | _ => false
+    }
+  } catch {
+  | Exn.Error(_) => false
+  }
+
+let validateProjectName = (~cwd=Process.cwd(), projectName) =>
+  if projectName->String.trim->String.length === 0 {
+    Error("Project name must not be empty.")
+  } else if !(packageNameRegExp->RegExp.test(projectName)) {
+    Error("Project name may only contain lower case letters, numbers and hyphens.")
+  } else {
+    let projectPath = Path.join2(cwd, projectName)
+
+    if Fs.existsSync(projectPath) && !(projectPath->containsOnlyDevcontainerDirectory) {
+      Error(`The folder ${projectName} already exist in the current directory.`)
+    } else {
+      Ok()
+    }
+  }
diff --git a/src/bindings/Node.res b/src/bindings/Node.res
index d3519b8..b9ff0e6 100644
--- a/src/bindings/Node.res
+++ b/src/bindings/Node.res
@@ -1,9 +1,19 @@
 module Fs = {
   @module("node:fs") external existsSync: string => bool = "existsSync"
 
+  @module("node:fs") external readdirSync: string => array<string> = "readdirSync"
+
   @module("node:fs")
   external readFileSync: (string, @as(json`"utf8"`) _) => string = "readFileSync"
 
+  type stats
+
+  @module("node:fs") external statSync: string => stats = "statSync"
+
+  module Stats = {
+    @send external isDirectory: stats => bool = "isDirectory"
+  }
+
   module Promises = {
     @module("node:fs") @scope("promises")
     external readFile: (string, @as(json`"utf8"`) _) => promise<string> = "readFile"
diff --git a/test/NewProjectValidationTest.res b/test/NewProjectValidationTest.res
new file mode 100644
index 0000000..6be884f
--- /dev/null
+++ b/test/NewProjectValidationTest.res
@@ -0,0 +1,65 @@
+open Node
+
+let testRoot = Path.join2(Process.cwd(), ".tmp-new-project-validation-test")
+let existingProjectMessage = "The folder my-app already exist in the current directory."
+
+let cleanupTestRoot = async () =>
+  await Fs.Promises.rm(testRoot, ~options={recursive: true, force: true})
+
+let resetTestRoot = async () => {
+  await cleanupTestRoot()
+  await Fs.Promises.mkdir(testRoot, ~options={recursive: true})
+}
+
+let assertValidationOk = result =>
+  switch result {
+  | Ok() => ()
+  | Error(message) => Assert.fail(`Expected project name to be valid, got: ${message}`)
+  }
+
+let assertValidationError = (result, expectedMessage) =>
+  switch result {
+  | Error(message) => Assert.strictEqual(message, expectedMessage)
+  | Ok() => Assert.fail(`Expected validation error: ${expectedMessage}`)
+  }
+
+let validateProjectName = projectName =>
+  NewProjectValidation.validateProjectName(~cwd=testRoot, projectName)
+
+Test.describe("NewProjectValidation", () => {
+  Test.testAsync("allows an existing project directory with only .devcontainer", async () => {
+    await resetTestRoot()
+    await Fs.Promises.mkdir(
+      Path.join([testRoot, "my-app", ".devcontainer"]),
+      ~options={
+        recursive: true,
+      },
+    )
+
+    validateProjectName("my-app")->assertValidationOk
+    await cleanupTestRoot()
+  })
+
+  Test.testAsync("rejects an existing project directory with additional files", async () => {
+    await resetTestRoot()
+    await Fs.Promises.mkdir(
+      Path.join([testRoot, "my-app", ".devcontainer"]),
+      ~options={
+        recursive: true,
+      },
+    )
+    await Fs.Promises.writeFile(Path.join([testRoot, "my-app", "package.json"]), "{}")
+
+    validateProjectName("my-app")->assertValidationError(existingProjectMessage)
+    await cleanupTestRoot()
+  })
+
+  Test.testAsync("rejects an existing project directory with a .devcontainer file", async () => {
+    await resetTestRoot()
+    await Fs.Promises.mkdir(Path.join2(testRoot, "my-app"), ~options={recursive: true})
+    await Fs.Promises.writeFile(Path.join([testRoot, "my-app", ".devcontainer"]), "")
+
+    validateProjectName("my-app")->assertValidationError(existingProjectMessage)
+    await cleanupTestRoot()
+  })
+})