How do you setup an FTP server to do a custom action on file upload?

This is fairly straightforward to do with Apache Mina FtpServer (http://mina.apache.org/ftpserver/). They have very nice authentication and file system abstractions, and a great FtpLet API which allows you to create your own custom actions on upload start/completion, and a few other triggers. It supports FTP and FTPS, but doesn't support SFTP (which is over an unrelated SSH protocol). Mina SSHD supports SFTP, but it's a young project which (as of June 2010) doesn't have the authentication/virtual FS abstraction/custom trigger abstraction yet, but the project is moving in that direction. I ended up using Mina FtpServer, and will likely change SSHD enough (and contribute back) to do what I need as well.

Our product BrickFTP, which is a paid service, has a feature called "webhooks" that will send an HTTP request to your server whenever a new file is uploaded.  There's also a REST API that will allow you to set up users however you'd like.  We are also integrated with http://www.zapier.com/ which makes it easier for you to add your users and perform your actions.See the docs here:https://brickftp.com/docs/webhook-api/ https://brickftp.com/docs/rest-api/

I feel duty-bound to say that you should try using SFTP instead of FTP, as it's less complex to secure and administer, and given the availability of encryption one should use it where possible. That said, if FTP is an absolute requirement, PureFTPd (http://www.pureftpd.org/project/pure-ftpd) can authenticate users against MySQL and PostrgreSQL, has a built-in mechanism for triggering shell or other scripts on upload, and is in my experience cleaner and less fiddly to set up than other FTP servers.

I suggest too the generic inotify solution for uploads in an specific directory (you monitor single directories, not trees, if users can create directories and upload files there it may not be a solution). Some ftp servers (at least pureftpd, not sure about vsftpd) let you execute an script on file upload. If will be more targetted than using inotify (i.e. won't execute an action if you fiddle around that directory using other protocols or shell), but that functionality must be builtin in the server. Another alternative (not great, but could work for you) is to have a cron job that with the find command checks for new files there since the last run (and maybe check with i.e. lsof that the ftp server is not still writting on that file)