A folding wagon assembly for enhanced portability and compact storage. The folding wagon assembly includes a wagon assembly comprising a folding bottom panel assembly and an upper rail assembly positioned in spaced relationship above the bottom panel assembly. Netting extends between the bottom panel assembly and the upper rail assembly to form a cargo compartment of the wagon. A pair of side members extend between the bottom panel assembly and the upper rail assembly. The upper rail assembly and the bottom panel assembly are each hingably coupled to the side members such that the upper rail assembly and the bottom panel assembly are foldable for compactly storing the wagon. A plurality of wheel assemblies are coupled to the bottom panel assembly for supporting the cargo compartment. A handle extends from the upper rail for facilitating movement of the cargo compartment.