I need to include one PHP file into another. The PHP file that needs to be included sits in a separate directory though. This is how it is set up:
folder1/glo
You are including functions.php in itself. Change functions.php to global-functions.php.
And just out of curiosity, why have different files for functions? Why not make classes and objects and make your life easier?
Try including the file with an absolute path: something like this:
<?php include ($_SERVER['DOCUMENT_ROOT']."/folder1/global-functions.php");?>
Your original include fails because... the relative path in your include is relative to the current directory, which in your case is not "folder1/folder2/". The current directory is likely to be the page from which you are serving your content.
You need to either use an absolute path (with the help of $_SERVER['DOCUMENT_ROOT']
as in @Coomie's answer) or change your include_path to include the location of your included files (but then you must not use a relative path, but you wouldn't need to anyway).