diff --git a/precicecasegenerate/cli.py b/precicecasegenerate/cli.py
index 0943f61..e86a495 100644
--- a/precicecasegenerate/cli.py
+++ b/precicecasegenerate/cli.py
@@ -6,6 +6,7 @@
 
 from precicecasegenerate import helper
 from precicecasegenerate import cli_helper
+from precicecasegenerate.state_tracker import StateTracker
 from precicecasegenerate.logging_setup import setup_logging
 from precicecasegenerate.input_handler.topology_reader import TopologyReader
 from precicecasegenerate.input_handler.topology_processor import TopologyProcessor
@@ -68,6 +69,10 @@ def generate_case(input_file: Path, output_root: Path) -> int:
     output_root.mkdir(parents=True, exist_ok=True)
     logger.debug(f"Created output directory at {output_root}")
 
+    # Track generated files
+    state_tracker = StateTracker(output_root)
+    state_tracker.backup_modified_files()
+
     logger.debug("Starting topology reader.")
     # Read the topology file
     topology_reader = TopologyReader(input_file.resolve())
@@ -98,9 +103,7 @@ def generate_case(input_file: Path, output_root: Path) -> int:
     for participant in participant_solver_map:
         participant_directory: Path = helper.get_participant_solver_directory(output_root, participant.name,
                                                                               participant_solver_map[participant])
-        # The directory will be overwritten if it already exists and is of the form "_generated/name-solver/"
-        if participant_directory.exists():
-            shutil.rmtree(participant_directory, ignore_errors=True)
+        # Create the participant directory if it does not exist
         participant_directory.mkdir(parents=True, exist_ok=True)
         logger.debug(f"Created participant directory at {participant_directory}")
 
@@ -114,6 +117,9 @@ def generate_case(input_file: Path, output_root: Path) -> int:
     logger.debug("Starting utility file creator.")
     utility_file_creator: UtilityFileCreator = UtilityFileCreator(participant_solver_map)
     utility_file_creator.create_utility_files(parent_directory=output_root)
+
+    state_tracker.save_new_state()
+
     return 0
 
 
diff --git a/precicecasegenerate/state_tracker.py b/precicecasegenerate/state_tracker.py
new file mode 100644
index 0000000..6301f84
--- /dev/null
+++ b/precicecasegenerate/state_tracker.py
@@ -0,0 +1,94 @@
+import json
+import hashlib
+import shutil
+import logging
+from datetime import datetime
+from pathlib import Path
+
+logger = logging.getLogger(__name__)
+
+
+class StateTracker:
+    def __init__(self, output_root: Path):
+        """
+        Initialize the StateTracker.
+        :param output_root: The root directory of the generated project.
+        """
+        self.output_root = output_root
+        self.state_file = output_root / ".file-state.json"
+        self.state = self._load_state()
+
+    def _load_state(self) -> dict:
+        """
+        Load the previous state hashes if the file exists.
+        :return: A dict mapping file paths to their hashes.
+        """
+        if self.state_file.exists():
+            try:
+                with open(self.state_file, "r") as f:
+                    return json.load(f)
+            except Exception as e:
+                logger.warning(f"Could not read state file: {e}")
+        return {}
+
+    def _hash_file(self, filepath: Path) -> str:
+        """
+        Generate a SHA-256 hash of a file.
+        :param filepath: The path to the file.
+        :return: The SHA-256 hash of the file as a hex string.
+        """
+        hasher = hashlib.sha256()
+        with open(filepath, "rb") as f:
+            hasher.update(f.read())
+        return hasher.hexdigest()
+
+    def backup_modified_files(self) -> None:
+        """
+        Check all previously generated files. If their current hash differs from the saved hash,
+        back them up before the generator overwrites them.
+        """
+        backup_dir: Path = None
+        for rel_path_str, saved_hash in self.state.items():
+            filepath: Path = self.output_root / rel_path_str
+            if filepath.exists() and filepath.is_file():
+                current_hash: str = self._hash_file(filepath)
+
+                if current_hash != saved_hash:
+                    # The user modified this file manually
+                    if backup_dir is None:
+                        timestamp: str = datetime.now().strftime('%Y%m%d_%H%M%S')
+                        backup_dir = self.output_root / "backups" / f"{timestamp}"
+                        backup_dir.mkdir(parents=True, exist_ok=True)
+
+                    # Keep the relative folder structure inside the backup folder
+                    backup_path: Path = backup_dir / rel_path_str
+                    backup_path.parent.mkdir(parents=True, exist_ok=True)
+
+                    # Move the file out of harm's way
+                    shutil.move(str(filepath), str(backup_path))
+                    logger.warning(f"File '{rel_path_str}' was manually modified. "
+                                   f"Backed up to '{backup_path.relative_to(self.output_root)}'.")
+
+    def save_new_state(self) -> None:
+        """
+        Hash all generated configuration and utility files and save the state.
+        """
+        new_state = {}
+        # Track configurations and scripts (ignore preCICE logs, backups, etc.)
+        tracked_extensions = {".xml", ".json", ".sh", ".md"}
+
+        for filepath in self.output_root.rglob("*"):
+            if filepath.is_file():
+                rel_path_str = str(filepath.relative_to(self.output_root))
+
+                # Skip the state file itself and anything in a backup folder
+                if rel_path_str == self.state_file.name or "backup_" in rel_path_str:
+                    continue
+
+                if filepath.suffix in tracked_extensions:
+                    new_state[rel_path_str] = self._hash_file(filepath)
+
+        # Write the new state invisibly
+        with open(self.state_file, "w") as f:
+            json.dump(new_state, f, indent=4)
+        logger.debug("File generation state tracked and saved.")
diff --git a/tests/state_tracker/test_state_tracker.py b/tests/state_tracker/test_state_tracker.py
new file mode 100644
index 0000000..7db7c7f
--- /dev/null
+++ b/tests/state_tracker/test_state_tracker.py
@@ -0,0 +1,65 @@
+"""
+This file tests the functionality of the StateTracker and the file generation process.
+"""
+import shutil
+from pathlib import Path
+
+from precicecasegenerate.cli import generate_case
+
+
+def test_state_tracker():
+    """
+    Check that running the generator again preserves custom files
+    and correctly backs up modified generated files before overwriting.
+    """
+    test_directory: Path = Path(__file__).parent
+    input_file: Path = test_directory / "topology.yaml"
+    generated_directory: Path = test_directory / "_generated"
+
+    # Remove any previously generated files
+    if generated_directory.exists():
+        shutil.rmtree(generated_directory, ignore_errors=True)
+
+    # Generate initial files
+    assert 0 == generate_case(input_file, generated_directory), "Initial case generation failed."
+
+    # Find the solver directory dynamically
+    solver_dirs: list[Path] = [d for d in generated_directory.iterdir()
+                               if d.is_dir() and "-" in d.name and not d.name.startswith("backup")]
+    assert len(solver_dirs) > 0, "No solver directory found."
+    solver_dir = solver_dirs[0]
+
+    # Add a custom file to the first solver directory
+    custom_file: Path = solver_dir / "info.txt"
+    custom_file.write_text("This is my custom mesh data.")
+
+    # Modify a generated file to simulate a manual edit
+    run_script: Path = solver_dir / "run.sh"
+    modified_content: str = run_script.read_text() + "\n# USER MODIFIED CONTENT\n"
+    run_script.write_text(modified_content)
+
+    # Run the generator a second time
+    assert 0 == generate_case(input_file, generated_directory), "Second case generation failed."
+
+    # Check that the custom file survived
+    assert custom_file.exists(), "Custom file was destroyed."
+    assert custom_file.read_text() == "This is my custom mesh data.", "Custom file content was altered."
+
+    # Check that the original file was overwritten with the template
+    new_run_script_content: str = run_script.read_text()
+    assert "# USER MODIFIED CONTENT" not in new_run_script_content, "The run.sh file was not overwritten with the template."
+
+    backups_root: Path = generated_directory / "backups"
+    assert backups_root.exists(), "The 'backups' directory was not created."
+
+    # Check that exactly one backup folder was created by the StateTracker
+    backup_dirs: list[Path] = list(backups_root.glob("*"))
+    assert len(backup_dirs) == 1, f"Expected 1 backup directory, found {len(backup_dirs)}."
+    backup_dir = backup_dirs[0]
+
+    # D) Check that the modified file was moved to the backup folder properly
+    # The relative structure is preserved, so it should be inside _generated/backups/<timestamp>/generator-asolver/run.sh
+    backed_up_file: Path = backup_dir / solver_dir.name / "run.sh"
+
+    assert backed_up_file.exists(), f"Modified file was not backed up to {backed_up_file}."
+    assert "# USER MODIFIED CONTENT" in backed_up_file.read_text(), "Backed up file does not contain manual edits."
diff --git a/tests/state_tracker/topology.yaml b/tests/state_tracker/topology.yaml
new file mode 100644
index 0000000..e848294
--- /dev/null
+++ b/tests/state_tracker/topology.yaml
@@ -0,0 +1,15 @@
+participants:
+  - name: Generator
+    solver: ASolver
+    dimensionality: 2
+  - name: Propagator
+    solver: BSolver
+    dimensionality: 2
+exchanges:
+  - from: Generator
+    to: Propagator
+    from-location-names: [interface]
+    to-location-names: [interface]
+    data: Color
+    type: weak
+    data-type: scalar
\ No newline at end of file