diff --git a/fs-v1.go b/fs-v1.go
index 26a8169bb..652e0a4da 100644
--- a/fs-v1.go
+++ b/fs-v1.go
@@ -81,7 +81,7 @@ func shutdownFS(storage StorageAPI) {
 // newFSObjects - initialize new fs object layer.
 func newFSObjects(disk string) (ObjectLayer, error) {
 	storage, err := newStorageAPI(disk)
-	if err != nil {
+	if err != nil && err != errDiskNotFound {
 		return nil, err
 	}
 
diff --git a/fs-v1_test.go b/fs-v1_test.go
new file mode 100644
index 000000000..49f9e6131
--- /dev/null
+++ b/fs-v1_test.go
@@ -0,0 +1,39 @@
+/*
+ * Minio Cloud Storage, (C) 2016 Minio, Inc.
+ *
+ * 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.
+ */
+
+package main
+
+import (
+	"os"
+	"path/filepath"
+	"testing"
+)
+
+// TestNewFS - tests initialization of all input disks
+// and constructs a valid `FS` object layer.
+func TestNewFS(t *testing.T) {
+	// Do not attempt to create this path, the test validates
+	// so that newFSObjects initializes non existing paths
+	// and successfully returns initialized object layer.
+	disk := filepath.Join(os.TempDir(), "minio-"+nextSuffix())
+	defer removeAll(disk)
+
+	// Initializes single disk, validate if there is no error.
+	_, err := newFSObjects(disk)
+	if err != nil {
+		t.Fatalf("Unable to initialize erasure, %s", err)
+	}
+}
diff --git a/posix.go b/posix.go
index f482bbca8..ed68fe0e8 100644
--- a/posix.go
+++ b/posix.go
@@ -101,7 +101,11 @@ func newPosix(diskPath string) (StorageAPI, error) {
 	st, err := os.Stat(preparePath(diskPath))
 	if err != nil {
 		if os.IsNotExist(err) {
-			return fs, errDiskNotFound
+			// Disk not found create it.
+			if err = os.MkdirAll(diskPath, 0777); err != nil {
+				return fs, err
+			}
+			return fs, nil
 		}
 		return fs, err
 	}
diff --git a/test-utils_test.go b/test-utils_test.go
index 698c344f6..dc595bbee 100644
--- a/test-utils_test.go
+++ b/test-utils_test.go
@@ -30,7 +30,9 @@ import (
 	"os"
 	"regexp"
 	"sort"
+	"strconv"
 	"strings"
+	"sync"
 	"testing"
 	"time"
 	"unicode/utf8"
@@ -61,6 +63,32 @@ const (
 	letterIdxMax  = 63 / letterIdxBits   // # of letter indices fitting in 63 bits
 )
 
+// Random number state.
+// We generate random temporary file names so that there's a good
+// chance the file doesn't exist yet.
+var randN uint32
+var randmu sync.Mutex
+
+// reseed - returns a new seed everytime the function is called.
+func reseed() uint32 {
+	return uint32(time.Now().UnixNano() + int64(os.Getpid()))
+}
+
+// nextSuffix - provides a new unique suffix everytime the function is called.
+func nextSuffix() string {
+	randmu.Lock()
+	r := randN
+	// Initial seed required, generate one.
+	if r == 0 {
+		r = reseed()
+	}
+	// constants from Numerical Recipes
+	r = r*1664525 + 1013904223
+	randN = r
+	randmu.Unlock()
+	return strconv.Itoa(int(1e9 + r%1e9))[1:]
+}
+
 // TestServer encapsulates an instantiation of a Minio instance with a temporary backend.
 // Example usage:
 //   s := StartTestServer(t,"XL")
diff --git a/xl-v1.go b/xl-v1.go
index b886106e9..3211f8eac 100644
--- a/xl-v1.go
+++ b/xl-v1.go
@@ -128,7 +128,9 @@ func newXLObjects(disks []string) (ObjectLayer, error) {
 	// Attempt to load all `format.json`.
 	formatConfigs, sErrs := loadAllFormats(storageDisks)
 
-	// Generic format check validates all necessary cases.
+	// Generic format check validates
+	// if (no quorum) return error
+	// if (disks not recognized) // Always error.
 	if err := genericFormatCheck(formatConfigs, sErrs); err != nil {
 		return nil, err
 	}
diff --git a/xl-v1_test.go b/xl-v1_test.go
index c7af8e2d0..a2cf6f1ba 100644
--- a/xl-v1_test.go
+++ b/xl-v1_test.go
@@ -16,7 +16,11 @@
 
 package main
 
-import "testing"
+import (
+	"os"
+	"path/filepath"
+	"testing"
+)
 
 // Collection of disks verbatim used for tests.
 var disks = []string{
@@ -112,3 +116,23 @@ func TestStorageInfo(t *testing.T) {
 		t.Fatalf("Diskinfo total values should be greater 0")
 	}
 }
+
+// TestNewXL - tests initialization of all input disks
+// and constructs a valid `XL` object
+func TestNewXL(t *testing.T) {
+	var nDisks = 16 // Maximum disks.
+	var erasureDisks []string
+	for i := 0; i < nDisks; i++ {
+		// Do not attempt to create this path, the test validates
+		// so that newFSObjects initializes non existing paths
+		// and successfully returns initialized object layer.
+		disk := filepath.Join(os.TempDir(), "minio-"+nextSuffix())
+		erasureDisks = append(erasureDisks, disk)
+		defer removeAll(disk)
+	}
+	// Initializes all erasure disks
+	_, err := newXLObjects(erasureDisks)
+	if err != nil {
+		t.Fatalf("Unable to initialize erasure, %s", err)
+	}
+}