diff --git a/platform/features/layout/bundle.json b/platform/features/layout/bundle.json
index 6f8630c07f..f1006d67e8 100644
--- a/platform/features/layout/bundle.json
+++ b/platform/features/layout/bundle.json
@@ -194,6 +194,12 @@
                 "templateUrl": "templates/elements/image.html"
             }
         ],
+        "policies": [
+            {
+                "category": "composition",
+                "implementation": "LayoutCompositionPolicy.js"
+            }
+        ],
         "types": [
             {
                 "key": "layout",
@@ -267,4 +273,4 @@
             }
         ]
     }
-}
\ No newline at end of file
+}
diff --git a/platform/features/layout/src/LayoutCompositionPolicy.js b/platform/features/layout/src/LayoutCompositionPolicy.js
new file mode 100644
index 0000000000..2c46484498
--- /dev/null
+++ b/platform/features/layout/src/LayoutCompositionPolicy.js
@@ -0,0 +1,52 @@
+/*****************************************************************************
+ * Open MCT Web, Copyright (c) 2014-2015, United States Government
+ * as represented by the Administrator of the National Aeronautics and Space
+ * Administration. All rights reserved.
+ *
+ * Open MCT Web is licensed under the Apache License, Version 2.0 (the
+ * "License"); you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ * http://www.apache.org/licenses/LICENSE-2.0.
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS, WITHOUT
+ * WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied. See the
+ * License for the specific language governing permissions and limitations
+ * under the License.
+ *
+ * Open MCT Web includes source code licensed under additional open source
+ * licenses. See the Open Source Licenses file (LICENSES.md) included with
+ * this source code distribution or the Licensing information page available
+ * at runtime from the About dialog for additional information.
+ *****************************************************************************/
+/*global define*/
+
+define(
+    [],
+    function () {
+        "use strict";
+
+        /**
+         * Defines composition policy for Display Layout objects.
+         * They cannot contain folders.
+         */
+        function LayoutCompositionPolicy() {
+            return {
+                /**
+                 * Is the type identified by the candidate allowed to
+                 * contain the type described by the context?
+                 */
+                allow: function (candidate, context) {
+                    var isFolderInLayout =
+                            candidate &&
+                            context &&
+                            candidate.instanceOf('layout') &&
+                            context.instanceOf('folder');
+                    return !isFolderInLayout;
+                }
+            };
+        }
+
+        return LayoutCompositionPolicy;
+    }
+);
diff --git a/platform/features/layout/test/LayoutCompositionPolicySpec.js b/platform/features/layout/test/LayoutCompositionPolicySpec.js
new file mode 100644
index 0000000000..f8ddec5bc5
--- /dev/null
+++ b/platform/features/layout/test/LayoutCompositionPolicySpec.js
@@ -0,0 +1,71 @@
+/*****************************************************************************
+ * Open MCT Web, Copyright (c) 2014-2015, United States Government
+ * as represented by the Administrator of the National Aeronautics and Space
+ * Administration. All rights reserved.
+ *
+ * Open MCT Web is licensed under the Apache License, Version 2.0 (the
+ * "License"); you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ * http://www.apache.org/licenses/LICENSE-2.0.
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS, WITHOUT
+ * WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied. See the
+ * License for the specific language governing permissions and limitations
+ * under the License.
+ *
+ * Open MCT Web includes source code licensed under additional open source
+ * licenses. See the Open Source Licenses file (LICENSES.md) included with
+ * this source code distribution or the Licensing information page available
+ * at runtime from the About dialog for additional information.
+ *****************************************************************************/
+/*global define,Promise,describe,it,expect,beforeEach,waitsFor,jasmine*/
+
+define(
+    ["../src/LayoutCompositionPolicy"],
+    function (LayoutCompositionPolicy) {
+        "use strict";
+        describe("Layout's composition policy", function () {
+            var mockCandidate,
+                mockContext,
+                candidateType,
+                contextType,
+                policy;
+
+            beforeEach(function () {
+                mockCandidate =
+                    jasmine.createSpyObj('candidateType', ['instanceOf']);
+                mockContext =
+                    jasmine.createSpyObj('contextType', ['instanceOf']);
+
+                mockCandidate.instanceOf.andCallFake(function (t) {
+                    return t === candidateType;
+                });
+                mockContext.instanceOf.andCallFake(function (t) {
+                    return t === contextType;
+                });
+
+                policy = new LayoutCompositionPolicy();
+            });
+
+            it("disallows folders in layouts", function () {
+                candidateType = 'layout';
+                contextType = 'folder';
+                expect(policy.allow(mockCandidate, mockContext)).toBe(false);
+            });
+
+            it("does not disallow folders elsewhere", function () {
+                candidateType = 'nonlayout';
+                contextType = 'folder';
+                expect(policy.allow(mockCandidate, mockContext)).toBe(true);
+            });
+
+            it("allows things other than folders in layouts", function () {
+                candidateType = 'layout';
+                contextType = 'nonfolder';
+                expect(policy.allow(mockCandidate, mockContext)).toBe(true);
+            });
+
+        });
+    }
+);
diff --git a/platform/features/layout/test/suite.json b/platform/features/layout/test/suite.json
index 3bc1a259c1..43b066d13e 100644
--- a/platform/features/layout/test/suite.json
+++ b/platform/features/layout/test/suite.json
@@ -2,6 +2,7 @@
     "FixedController",
     "FixedDragHandle",
     "FixedProxy",
+    "LayoutCompositionPolicy",
     "LayoutController",
     "LayoutDrag",
     "elements/AccessorMutator",
@@ -13,4 +14,4 @@
     "elements/ResizeHandle",
     "elements/TelemetryProxy",
     "elements/TextProxy"
-]
\ No newline at end of file
+]