How do I fix a "Can't access Dropbox folder" error?

if you put these in /etc/sysctl.conf:

fs.inotify.max_user_watches = 1048576
fs.inotify.max_user_instances = 256

it will fix the issue. You may have to run sudo sysctl -p for these settings to take effect.

Alternatively, if you are not interested in making these settings permanent, you may try the following commands...

sudo sysctl fs.inotify.max_user_instances=256
sudo sysctl fs.inotify.max_user_watches=1048576

In this case the settings will be lost after a reboot.

The problem is that the system has run out of inotify instances. You can check your syslog (e.g. by using tail -f /var/log/syslog) and if you see...

tail: inotify cannot be used, reverting to polling: Too many open file

then you know this is your issue. For me it was nepomuk.

The fs.inotify.max_user_instances=256 fixed my immediate "Can't access dropbox folder" problem (Ubuntu 12.04).

It also cleared up an odd behavior I'd noticed, where the dropbox systray icon continually indicated file activity: The arrow circles cycling continually, though nothing was changing in my dropbox, and the "recently changed files" list remained unchanged.

A few moments after I changed fs.inotify.max_user_instances=256, the pointless cycling stopped.