Welcome to LQ Security.
Let's start by asking what have your tried so far? Are you familiar with how Linux permissions works with read, write, and execute access control for the owner, group, and others? The
potential trouble you face with your structure is that if you make folder3 a sub folder of one and two, that user1 won't be able to access folder3 because of the path traversal.
Try this experiment: as root, under the root directory, /root create folder1, folder2, folder3 as in your structure. Then change the permissions on folder1 and folder2 to disallow others and group read access. Since they are directories you must keep the execute permission for them to be useable. So, issue "chmod og-r" on folder1 and folder2. Then create a small text file in each of the three folders. Now, become a normal user and try to read the files. You won't be able to. Neither will you be able to cd to the directories. The problem is that you lack read permission on /root, which prohibits you from accessing the stuff below it.
Now, (as root) move this folder structure to /, which is still root territory, but a normal user can read the folder. You should now see that a normal user can cd to folder3, and access it's contents, but can not read the contents of folder1 and folder 2. See the block below for an example of the results.
Alternatively, you can use a tool such as SELinux to provide user based MAC, Mandatory, Access, Control, but that gets into a very advanced topic. I mention it only because as you search for solutions you will likely come across it and while it is a solution, it is one that is not necessary for your situation.
Code:
bash-4.2$ ls /folder1
ls: cannot open directory /folder1: Permission denied
bash-4.2$ ls /folder1/folder2
ls: cannot open directory /folder1/folder2: Permission denied
bash-4.2$ ls /folder1/folder2/folder3
file3 file3~
bash-4.2$ cd /folder1
bash-4.2$ ls
ls: cannot open directory .: Permission denied
bash-4.2$ cd /folder1/folder2/
bash-4.2$ ls
ls: cannot open directory .: Permission denied
bash-4.2$ cd folder3
bash-4.2$ ls
file3 file3~
bash-4.2$ cat file3
this is a file with some stuff in it!
bash-4.2$ pwd
/folder1/folder2/folder3
bash-4.2$
And here is the entire structure:
root@slacker:~# cd /
root@slacker:/# ls -laR folder1
folder1:
total 12
drwx--x--x 3 root root 4096 May 14 05:09 ./
drwxr-xr-x 24 root root 4096 May 14 05:07 ../
-rw-r--r-- 1 root root 0 May 14 05:09 file1
drwx--x--x 3 root root 4096 May 14 05:09 folder2/
folder1/folder2:
total 12
drwx--x--x 3 root root 4096 May 14 05:09 ./
drwx--x--x 3 root root 4096 May 14 05:09 ../
-rw-r--r-- 1 root root 0 May 14 05:09 file2
drwxr-xr-x 2 root root 4096 May 14 05:09 folder3/
folder1/folder2/folder3:
total 12
drwxr-xr-x 2 root root 4096 May 14 05:09 ./
drwx--x--x 3 root root 4096 May 14 05:09 ../
-rw-r--r-- 1 root root 38 May 14 05:09 file3
-rw-r--r-- 1 root root 0 May 14 05:09 file3~
root@slacker:/#
