File Not Found when creating a new site in SharePoint

I ran into this problem when creating a new sub site (Sites and Workspaces) under the default team site that gets created when you install SharePoint Services. I would get File Not Found every time I tried creating a new site under the main site. Though I found lot of information on the internet on resolving the issue, none of them worked for me.

The solution is very simple. Under STN Team Site > Site Settings > Sites and Workspaces click on "Site Creating Permission" button. Select the "Design" permission level and click OK. That's it, now you should be able to create any number of new sites.

The error File Not Found is miss leading when the issue is related to permissions.