Break NTFS inheritance on the toplevel folder. I'll call it
root in this answer. Then grant
Authenticated Users - Read to
This Folder Only in the advanced view. You might also want to add
Administrators - Full Control to
This Folder, subfolders, and files so that administrators of the server can still traverse the entire directory tree.
Then, make your two subfolders:
folder2 in this example. These folders should inherit the
Administrators - Full Control ACE, but not the
Authenticated Users - Read one. Now, you can just add the groups and grant permissions as needed on the subfolders.
You'll end up with something like this:
-root (Authenticated Users - Read, Administrators - Full)
----folder1 (Authenticated Users - Read, Group1 - Modify)
----folder2 (Group2 - Modify)
Just as a side note, you almost never want to give Full Control to users, you want to give Modify. This will let them delete, create, rename, etc but giving them Full Control instead allows them to change permissions as well.