Why can't PHP create a directory with 777 permissions?

The mode is modified by your current umask, which is 022 in this case.

The way the umask works is a subtractive one. You take the initial permission given to mkdir and subtract the umask to get the actual permission:

  0777
- 0022
======
  0755 = rwxr-xr-x.

If you don't want this to happen, you need to set your umask temporarily to zero so it has no effect. You can do this with the following snippet:

$oldmask = umask(0);
mkdir("test", 0777);
umask($oldmask);

The first line changes the umask to zero while storing the previous one into $oldmask. The second line makes the directory using the desired permissions and (now irrelevant) umask. The third line restores the umask to what it was originally.

See the PHP doco for umask and mkdir for more details.

The creation of files and directories is affected by the setting of umask. You can create files with a particular set of permissions by manipulating umask as follows :-

$old = umask(0);
mkdir("test", 0777);
umask($old);

Avoid using this function in multithreaded webservers. It is better to change the file permissions with chmod() after creating the file.

Example:

$dir = "test";
$permit = 0777;

mkdir($dir);
chmod($dir, $permit);