diff --git a/Cargo.lock b/Cargo.lock
index b48cdd9..35c50ac 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -462,11 +462,13 @@ dependencies = [
  "salsa",
  "serde",
  "serde_json",
+ "tempfile",
  "tokio",
  "tower-lsp-server",
  "tracing",
  "tracing-appender",
  "tracing-subscriber",
+ "vfs",
 ]
 
 [[package]]
@@ -549,6 +551,18 @@ version = "2.3.0"
 source = "registry+https://github.com/rust-lang/crates.io-index"
 checksum = "37909eebbb50d72f9059c3b6d82c0463f2ff062c9e95845c43a6c9c0355411be"
 
+[[package]]
+name = "filetime"
+version = "0.2.25"
+source = "registry+https://github.com/rust-lang/crates.io-index"
+checksum = "35c0522e981e68cbfa8c3f978441a5f34b30b96e146b33cd3359176b50fe8586"
+dependencies = [
+ "cfg-if",
+ "libc",
+ "libredox",
+ "windows-sys 0.59.0",
+]
+
 [[package]]
 name = "fluent-uri"
 version = "0.1.4"
@@ -809,6 +823,7 @@ checksum = "391290121bad3d37fbddad76d8f5d1c1c314cfc646d143d7e07a3086ddff0ce3"
 dependencies = [
  "bitflags 2.9.2",
  "libc",
+ "redox_syscall",
 ]
 
 [[package]]
@@ -1877,6 +1892,15 @@ version = "0.9.5"
 source = "registry+https://github.com/rust-lang/crates.io-index"
 checksum = "0b928f33d975fc6ad9f86c8f283853ad26bdd5b10b7f1542aa2fa15e2289105a"
 
+[[package]]
+name = "vfs"
+version = "0.12.2"
+source = "registry+https://github.com/rust-lang/crates.io-index"
+checksum = "9e723b9e1c02a3cf9f9d0de6a4ddb8cdc1df859078902fe0ae0589d615711ae6"
+dependencies = [
+ "filetime",
+]
+
 [[package]]
 name = "wasi"
 version = "0.11.1+wasi-snapshot-preview1"
diff --git a/Cargo.toml b/Cargo.toml
index 2a674a3..c6dc33c 100644
--- a/Cargo.toml
+++ b/Cargo.toml
@@ -29,6 +29,7 @@ toml = "0.9"
 tracing = "0.1"
 tracing-appender = "0.2"
 tracing-subscriber = { version = "0.3", features = ["env-filter", "fmt", "time"] }
+vfs = "0.12.2"
 which = "8.0"
 
 # testing
diff --git a/crates/djls-server/Cargo.toml b/crates/djls-server/Cargo.toml
index 396f0f3..372554f 100644
--- a/crates/djls-server/Cargo.toml
+++ b/crates/djls-server/Cargo.toml
@@ -23,9 +23,13 @@ tower-lsp-server = { workspace = true }
 tracing = { workspace = true }
 tracing-appender = { workspace = true }
 tracing-subscriber = { workspace = true }
+vfs = { workspace = true }
 
 [build-dependencies]
 djls-dev = { workspace = true }
 
+[dev-dependencies]
+tempfile = { workspace = true }
+
 [lints]
 workspace = true
diff --git a/crates/djls-server/src/session.rs b/crates/djls-server/src/session.rs
index d4e8aaf..3d8fcde 100644
--- a/crates/djls-server/src/session.rs
+++ b/crates/djls-server/src/session.rs
@@ -7,7 +7,7 @@ use tower_lsp_server::lsp_types::InitializeParams;
 use crate::db::ServerDatabase;
 use crate::workspace::Store;
 
-#[derive(Default)]
+
 pub struct Session {
     project: Option<DjangoProject>,
     documents: Store,
@@ -65,7 +65,7 @@ impl Session {
         Self {
             client_capabilities: params.capabilities.clone(),
             project,
-            documents: Store::default(),
+            documents: Store::new(project_path.as_ref().unwrap_or(&std::env::current_dir().unwrap())).unwrap(),
             settings,
             db_handle: StorageHandle::new(None),
         }
diff --git a/crates/djls-server/src/workspace/fs.rs b/crates/djls-server/src/workspace/fs.rs
new file mode 100644
index 0000000..6cef3fc
--- /dev/null
+++ b/crates/djls-server/src/workspace/fs.rs
@@ -0,0 +1,362 @@
+use std::path::Path;
+use vfs::{MemoryFS, PhysicalFS, VfsPath, VfsResult, VfsMetadata, SeekAndRead, SeekAndWrite};
+use std::time::SystemTime;
+
+/// A file system for managing workspace file content with manual layer management.
+/// 
+/// The file system uses two separate layers:
+/// - Memory layer: for unsaved edits and temporary content
+/// - Physical layer: for disk-based files
+/// 
+/// When reading, the memory layer is checked first, falling back to physical layer.
+/// Write operations go to memory layer only, preserving original files on disk.
+/// Clearing memory layer allows immediate fallback to physical layer without whiteout markers.
+#[derive(Debug)]
+pub struct FileSystem {
+    memory: VfsPath,
+    physical: VfsPath,
+}
+
+impl FileSystem {
+    /// Create a new FileSystem with separate memory and physical layers
+    pub fn new<P: AsRef<Path>>(root_path: P) -> VfsResult<Self> {
+        let memory = VfsPath::new(MemoryFS::new());
+        let physical = VfsPath::new(PhysicalFS::new(root_path.as_ref()));
+        
+        Ok(FileSystem { memory, physical })
+    }
+    
+    /// Read content from the file system
+    /// Checks memory layer first, then falls back to physical layer
+    pub fn read(&self, path: &str) -> VfsResult<String> {
+        let memory_path = self.memory.join(path)?;
+        if memory_path.exists()? {
+            return memory_path.read_to_string();
+        }
+        
+        let physical_path = self.physical.join(path)?;
+        physical_path.read_to_string()
+    }
+    
+    /// Write content to memory layer only
+    /// This preserves the original file on disk while allowing edits
+    pub fn write_memory(&self, path: &str, content: &str) -> VfsResult<()> {
+        let memory_path = self.memory.join(path)?;
+        
+        // Ensure parent directories exist in memory layer
+        let parent = memory_path.parent();
+        if !parent.is_root() && !parent.exists()? {
+            parent.create_dir_all()?;
+        }
+        
+        memory_path.create_file()?.write_all(content.as_bytes())?;
+        Ok(())
+    }
+    
+    /// Clear memory layer content for a specific path
+    /// After clearing, reads will fall back to physical layer
+    /// No whiteout markers are created - direct memory layer management
+    pub fn clear_memory(&self, path: &str) -> VfsResult<()> {
+        let memory_path = self.memory.join(path)?;
+        
+        // Only remove if it exists in memory layer
+        if memory_path.exists()? {
+            memory_path.remove_file()?;
+        }
+        
+        Ok(())
+    }
+    
+    /// Check if a path exists in either layer
+    /// Checks memory layer first, then physical layer
+    pub fn exists(&self, path: &str) -> VfsResult<bool> {
+        let memory_path = self.memory.join(path)?;
+        if memory_path.exists()? {
+            return Ok(true);
+        }
+        
+        let physical_path = self.physical.join(path)?;
+        physical_path.exists()
+    }
+    
+    /// Get memory layer root for advanced operations
+    pub fn memory_root(&self) -> VfsPath {
+        self.memory.clone()
+    }
+    
+    /// Get physical layer root for advanced operations
+    pub fn physical_root(&self) -> VfsPath {
+        self.physical.clone()
+    }
+    
+    /// Get root for backward compatibility (returns memory root)
+    pub fn root(&self) -> VfsPath {
+        self.memory.clone()
+    }
+}
+
+// Implement vfs::FileSystem trait to make our FileSystem compatible with VfsPath
+impl vfs::FileSystem for FileSystem {
+    fn read_dir(&self, path: &str) -> VfsResult<Box<dyn Iterator<Item = String> + Send>> {
+        // Check memory layer first, then physical
+        let memory_path = self.memory.join(path)?;
+        if memory_path.exists()? {
+            return Ok(Box::new(memory_path.read_dir()?.map(|p| p.filename())));
+        }
+        
+        let physical_path = self.physical.join(path)?;
+        Ok(Box::new(physical_path.read_dir()?.map(|p| p.filename())))
+    }
+    
+    fn create_dir(&self, path: &str) -> VfsResult<()> {
+        // Create directory in memory layer only
+        let memory_path = self.memory.join(path)?;
+        memory_path.create_dir()
+    }
+    
+    fn open_file(&self, path: &str) -> VfsResult<Box<dyn SeekAndRead + Send>> {
+        // Check memory layer first, then physical
+        let memory_path = self.memory.join(path)?;
+        if memory_path.exists()? {
+            return memory_path.open_file();
+        }
+        
+        let physical_path = self.physical.join(path)?;
+        physical_path.open_file()
+    }
+    
+    fn create_file(&self, path: &str) -> VfsResult<Box<dyn SeekAndWrite + Send>> {
+        // Create file in memory layer only
+        let memory_path = self.memory.join(path)?;
+        
+        // Ensure parent directories exist in memory layer
+        let parent = memory_path.parent();
+        if !parent.is_root() && !parent.exists()? {
+            parent.create_dir_all()?;
+        }
+        
+        memory_path.create_file()
+    }
+    
+    fn append_file(&self, path: &str) -> VfsResult<Box<dyn SeekAndWrite + Send>> {
+        // For append, we need to check if file exists and copy to memory if needed
+        let memory_path = self.memory.join(path)?;
+        
+        if !memory_path.exists()? {
+            // Copy from physical to memory first if it exists
+            let physical_path = self.physical.join(path)?;
+            if physical_path.exists()? {
+                let content = physical_path.read_to_string()?;
+                self.write_memory(path, &content)?;
+            }
+        }
+        
+        memory_path.append_file()
+    }
+    
+    fn metadata(&self, path: &str) -> VfsResult<VfsMetadata> {
+        // Check memory layer first, then physical
+        let memory_path = self.memory.join(path)?;
+        if memory_path.exists()? {
+            return memory_path.metadata();
+        }
+        
+        let physical_path = self.physical.join(path)?;
+        physical_path.metadata()
+    }
+    
+    fn set_creation_time(&self, path: &str, time: SystemTime) -> VfsResult<()> {
+        // Set on memory layer if exists, otherwise physical
+        let memory_path = self.memory.join(path)?;
+        if memory_path.exists()? {
+            return memory_path.set_creation_time(time);
+        }
+        
+        let physical_path = self.physical.join(path)?;
+        physical_path.set_creation_time(time)
+    }
+    
+    fn set_modification_time(&self, path: &str, time: SystemTime) -> VfsResult<()> {
+        // Set on memory layer if exists, otherwise physical
+        let memory_path = self.memory.join(path)?;
+        if memory_path.exists()? {
+            return memory_path.set_modification_time(time);
+        }
+        
+        let physical_path = self.physical.join(path)?;
+        physical_path.set_modification_time(time)
+    }
+    
+    fn set_access_time(&self, path: &str, time: SystemTime) -> VfsResult<()> {
+        // Set on memory layer if exists, otherwise physical
+        let memory_path = self.memory.join(path)?;
+        if memory_path.exists()? {
+            return memory_path.set_access_time(time);
+        }
+        
+        let physical_path = self.physical.join(path)?;
+        physical_path.set_access_time(time)
+    }
+    
+    fn exists(&self, path: &str) -> VfsResult<bool> {
+        // Use our existing method which already handles layer checking
+        self.exists(path)
+    }
+    
+    fn remove_file(&self, path: &str) -> VfsResult<()> {
+        // Only remove from memory layer - this aligns with our LSP semantics
+        let memory_path = self.memory.join(path)?;
+        if memory_path.exists()? {
+            memory_path.remove_file()?;
+        }
+        Ok(())
+    }
+    
+    fn remove_dir(&self, path: &str) -> VfsResult<()> {
+        // Only remove from memory layer - this aligns with our LSP semantics
+        let memory_path = self.memory.join(path)?;
+        if memory_path.exists()? {
+            memory_path.remove_dir()?;
+        }
+        Ok(())
+    }
+}
+
+#[cfg(test)]
+mod tests {
+    use super::*;
+    use std::fs;
+    use tempfile::TempDir;
+    
+    #[test]
+    fn test_new_vfs() {
+        let temp_dir = TempDir::new().unwrap();
+        let vfs = FileSystem::new(temp_dir.path()).unwrap();
+        
+        // Should be able to get roots
+        let _memory_root = vfs.memory_root();
+        let _physical_root = vfs.physical_root();
+        let _root = vfs.root();
+    }
+    
+    #[test]
+    fn test_read_physical_file() {
+        let temp_dir = TempDir::new().unwrap();
+        let test_file = temp_dir.path().join("test.html");
+        fs::write(&test_file, "physical content").unwrap();
+        
+        let vfs = FileSystem::new(temp_dir.path()).unwrap();
+        let content = vfs.read("test.html").unwrap();
+        
+        assert_eq!(content, "physical content");
+    }
+    
+    #[test]
+    fn test_write_memory_and_read() {
+        let temp_dir = TempDir::new().unwrap();
+        let vfs = FileSystem::new(temp_dir.path()).unwrap();
+        
+        vfs.write_memory("test.html", "memory content").unwrap();
+        let content = vfs.read("test.html").unwrap();
+        
+        assert_eq!(content, "memory content");
+    }
+    
+    #[test]
+    fn test_memory_layer_priority() {
+        let temp_dir = TempDir::new().unwrap();
+        let test_file = temp_dir.path().join("test.html");
+        fs::write(&test_file, "physical content").unwrap();
+        
+        let vfs = FileSystem::new(temp_dir.path()).unwrap();
+        
+        // First read should get physical content
+        assert_eq!(vfs.read("test.html").unwrap(), "physical content");
+        
+        // Write to memory layer
+        vfs.write_memory("test.html", "memory content").unwrap();
+        
+        // Now read should get memory content (higher priority)
+        assert_eq!(vfs.read("test.html").unwrap(), "memory content");
+        
+        // Physical file should remain unchanged
+        let physical_content = fs::read_to_string(&test_file).unwrap();
+        assert_eq!(physical_content, "physical content");
+    }
+    
+    #[test]
+    fn test_clear_memory_fallback() {
+        let temp_dir = TempDir::new().unwrap();
+        let test_file = temp_dir.path().join("test.html");
+        fs::write(&test_file, "physical content").unwrap();
+        
+        let vfs = FileSystem::new(temp_dir.path()).unwrap();
+        
+        // Write to memory
+        vfs.write_memory("test.html", "memory content").unwrap();
+        assert_eq!(vfs.read("test.html").unwrap(), "memory content");
+        
+        // Clear memory
+        vfs.clear_memory("test.html").unwrap();
+        
+        // Should now read from physical layer
+        assert_eq!(vfs.read("test.html").unwrap(), "physical content");
+    }
+    
+    #[test]
+    fn test_exists() {
+        let temp_dir = TempDir::new().unwrap();
+        let test_file = temp_dir.path().join("physical.html");
+        fs::write(&test_file, "content").unwrap();
+        
+        let vfs = FileSystem::new(temp_dir.path()).unwrap();
+        
+        // Physical file exists
+        assert!(vfs.exists("physical.html").unwrap());
+        
+        // Memory file exists after writing
+        vfs.write_memory("memory.html", "content").unwrap();
+        assert!(vfs.exists("memory.html").unwrap());
+        
+        // Non-existent file
+        assert!(!vfs.exists("nonexistent.html").unwrap());
+    }
+    
+    #[test]
+    fn test_clear_memory_nonexistent() {
+        let temp_dir = TempDir::new().unwrap();
+        let vfs = FileSystem::new(temp_dir.path()).unwrap();
+        
+        // Should not error when clearing non-existent memory file
+        vfs.clear_memory("nonexistent.html").unwrap();
+    }
+
+    #[test]
+    fn test_vfs_trait_implementation() {
+        let temp_dir = TempDir::new().unwrap();
+        let test_file = temp_dir.path().join("trait_test.html");
+        fs::write(&test_file, "trait physical content").unwrap();
+        
+        let filesystem = FileSystem::new(temp_dir.path()).unwrap();
+        let vfs_path = VfsPath::new(filesystem);
+        
+        // Test that our FileSystem works as a vfs::FileSystem trait
+        assert!(vfs_path.join("trait_test.html").unwrap().exists().unwrap());
+        
+        // Test reading through trait
+        let content = vfs_path.join("trait_test.html").unwrap().read_to_string().unwrap();
+        assert_eq!(content, "trait physical content");
+        
+        // Test creating file through trait
+        let new_file = vfs_path.join("new_trait_file.html").unwrap();
+        new_file.create_file().unwrap().write_all(b"trait memory content").unwrap();
+        
+        // Should read from memory layer
+        let memory_content = new_file.read_to_string().unwrap();
+        assert_eq!(memory_content, "trait memory content");
+        
+        // Physical file should not exist (memory layer only)
+        let physical_new_file = temp_dir.path().join("new_trait_file.html");
+        assert!(!physical_new_file.exists());
+    }
+}
diff --git a/crates/djls-server/src/workspace/mod.rs b/crates/djls-server/src/workspace/mod.rs
index fb15df9..5411c53 100644
--- a/crates/djls-server/src/workspace/mod.rs
+++ b/crates/djls-server/src/workspace/mod.rs
@@ -1,6 +1,8 @@
 mod document;
 mod store;
 mod utils;
+mod fs;
 
 pub use store::Store;
 pub use utils::get_project_path;
+pub use fs::FileSystem;
diff --git a/crates/djls-server/src/workspace/store.rs b/crates/djls-server/src/workspace/store.rs
index 3ec2109..928fd65 100644
--- a/crates/djls-server/src/workspace/store.rs
+++ b/crates/djls-server/src/workspace/store.rs
@@ -1,4 +1,6 @@
+use super::fs::FileSystem;
 use std::collections::HashMap;
+use std::path::PathBuf;
 
 use anyhow::anyhow;
 use anyhow::Result;
@@ -20,13 +22,26 @@ use super::document::ClosingBrace;
 use super::document::LanguageId;
 use super::document::TextDocument;
 
-#[derive(Debug, Default)]
+#[derive(Debug)]
 pub struct Store {
     documents: HashMap<String, TextDocument>,
     versions: HashMap<String, i32>,
+    vfs: FileSystem,
+    root_path: PathBuf,
 }
 
 impl Store {
+    pub fn new<P: AsRef<std::path::Path>>(root_path: P) -> anyhow::Result<Self> {
+        let root_path = root_path.as_ref().to_path_buf();
+        let vfs = FileSystem::new(&root_path)?;
+
+        Ok(Store {
+            documents: HashMap::new(),
+            versions: HashMap::new(),
+            vfs,
+            root_path,
+        })
+    }
     pub fn handle_did_open(&mut self, db: &dyn Database, params: &DidOpenTextDocumentParams) {
         let uri = params.text_document.uri.to_string();
         let version = params.text_document.version;