I\'m currently reorganising our TFS source control for a very large set of solutions, and I\'ve done this successfully so far.
I have a problem at the moment where I
In VS2013 I couldn't find it under @Radhika answer
I did find it under Team Explorer > Source Control Explorer >right mouse on project > Branching and Merging > Convert to folder

Hope this saves you time.
Edit Copied from comment by @DdW: you need to do a Get Latest Version after converting, before the Delete option will be enabled