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I am trying to restrict few users to view only one folder in the library and those users should have access to add documents in that folder. Below is the approach I used:

  1. Provide Design, Contribute, Read access at the first level of the folder

  2. Click Manage Permissions for the specific folder for which I need to apply the access for users. Choose Stop Inheriting the permissions from Parent folder. Now, the user who was added in step 1 has got all access to this folder and any further changes applied at Parent level will not impact this folder is my understanding.

  3. Click Library Permissions at Parent folder level and removed the access.

Now, The user is able to view the specific folder and all other folders are invisible.. Good for me. But, He is unable to add documents in that specific folder.

can someone suggest the correct way of getting this done?

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Try below steps

  1. Create new library
  2. Now the library will provide the same permission set in the site
  3. Create a folder
  4. Break Permission Inheritance - Then remove all users/groups
  5. Now add the user and provide contribute permission
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