diff --git a/features/environment.py b/features/environment.py
index c98246dc85..b345d46f7b 100644
--- a/features/environment.py
+++ b/features/environment.py
@@ -117,12 +117,12 @@ def _setup_minimal_env(context):
 def _install_project_requirements(context):
     install_reqs = (
         Path(
-            "kedro/templates/project/{{ cookiecutter.repo_name }}/src/requirements.txt"
+            "kedro/templates/project/{{ cookiecutter.repo_name }}/requirements.txt"
         )
         .read_text(encoding="utf-8")
         .splitlines()
     )
-    install_reqs = [req for req in install_reqs if "{" not in req]
+    install_reqs = [req for req in install_reqs if ("{" not in req) and (not req.startswith("-e"))]
     install_reqs.append(".[pandas.CSVDataSet]")
     call([context.pip, "install", *install_reqs], env=context.env)
     return context
diff --git a/kedro/templates/project/{{ cookiecutter.repo_name }}/README.md b/kedro/templates/project/{{ cookiecutter.repo_name }}/README.md
index 9ece71ad8e..98f5ba29b1 100644
--- a/kedro/templates/project/{{ cookiecutter.repo_name }}/README.md	
+++ b/kedro/templates/project/{{ cookiecutter.repo_name }}/README.md	
@@ -64,12 +64,6 @@ After this, if you'd like to update your project requirements, please update `re
 > Jupyter, JupyterLab, and IPython are already included in the project requirements by default, so once you have run `pip install -r requirements.txt` you will not need to take any extra steps before you use them.
 
 ### Jupyter
-To use Jupyter notebooks in your Kedro project, you need to install Jupyter:
-
-```
-pip install jupyter
-```
-
 After installing Jupyter, you can start a local notebook server:
 
 ```
@@ -77,12 +71,6 @@ kedro jupyter notebook
 ```
 
 ### JupyterLab
-To use JupyterLab, you need to install it:
-
-```
-pip install jupyterlab
-```
-
 You can also start JupyterLab:
 
 ```
diff --git a/kedro/templates/project/{{ cookiecutter.repo_name }}/pyproject.toml b/kedro/templates/project/{{ cookiecutter.repo_name }}/pyproject.toml
index 7ae06368bd..272b85c22d 100644
--- a/kedro/templates/project/{{ cookiecutter.repo_name }}/pyproject.toml	
+++ b/kedro/templates/project/{{ cookiecutter.repo_name }}/pyproject.toml	
@@ -1,3 +1,52 @@
+[build-system]
+requires = ["setuptools"]
+build-backend = "setuptools.build_meta"
+
+[project]
+name = "{{ cookiecutter.python_package }}"
+dependencies = [
+    "kedro~={{ cookiecutter.kedro_version }}",
+]
+dynamic = ["version"]
+
+[project.scripts]
+{{ cookiecutter.repo_name }} = "{{ cookiecutter.python_package }}.__main__:main"
+
+[project.optional-dependencies]
+docs = [
+    "docutils<0.18.0",
+    "sphinx~=3.4.3",
+    "sphinx_rtd_theme==0.5.1",
+    "nbsphinx==0.8.1",
+    "nbstripout~=0.4",
+    "sphinx-autodoc-typehints==1.11.1",
+    "sphinx_copybutton==0.3.1",
+    "ipykernel>=5.3, <7.0",
+    "Jinja2<3.1.0",
+    "myst-parser~=0.17.2",
+]
+dev = [
+    "black~=22.0",
+    "flake8>=3.7.9, <5.0",
+    "ipython>=7.31.1, <8.0; python_version < '3.8'",
+    "ipython~=8.10; python_version >= '3.8'",
+    "isort~=5.0",
+    "jupyter~=1.0",
+    "jupyterlab_server>=2.11.1, <2.16.0",
+    "jupyterlab~=3.0, <3.6.0",
+    "nbstripout~=0.4",
+    "pytest-cov~=3.0",
+    "pytest-mock>=1.7.1, <2.0",
+    "pytest~=7.2",
+]
+
+[tool.setuptools.dynamic]
+version = {attr = "{{ cookiecutter.python_package }}.__version__"}
+
+[tool.setuptools.packages.find]
+where = ["src"]
+namespaces = false
+
 [tool.kedro]
 package_name = "{{ cookiecutter.python_package }}"
 project_name = "{{ cookiecutter.project_name }}"
diff --git a/kedro/templates/project/{{ cookiecutter.repo_name }}/requirements.txt b/kedro/templates/project/{{ cookiecutter.repo_name }}/requirements.txt
index aa7ee32014..c728a75cc3 100644
--- a/kedro/templates/project/{{ cookiecutter.repo_name }}/requirements.txt	
+++ b/kedro/templates/project/{{ cookiecutter.repo_name }}/requirements.txt	
@@ -1,3 +1,8 @@
+$ cat requirements.txt
+# Install library code
+-e file:.
+
+# Development dependencies
 black~=22.0
 flake8>=3.7.9, <5.0
 ipython>=7.31.1, <8.0; python_version < '3.8'
@@ -6,8 +11,6 @@ isort~=5.0
 jupyter~=1.0
 jupyterlab_server>=2.11.1, <2.16.0
 jupyterlab~=3.0, <3.6.0
-kedro~={{ cookiecutter.kedro_version }}
-kedro-telemetry~=0.2.0
 nbstripout~=0.4
 pytest-cov~=3.0
 pytest-mock>=1.7.1, <2.0
diff --git a/kedro/templates/project/{{ cookiecutter.repo_name }}/setup.py b/kedro/templates/project/{{ cookiecutter.repo_name }}/setup.py
deleted file mode 100644
index 8e62d661f8..0000000000
--- a/kedro/templates/project/{{ cookiecutter.repo_name }}/setup.py	
+++ /dev/null
@@ -1,39 +0,0 @@
-from setuptools import find_packages, setup
-
-entry_point = (
-    "{{ cookiecutter.repo_name }} = {{ cookiecutter.python_package }}.__main__:main"
-)
-
-
-# get the dependencies and installs
-with open("requirements.txt", encoding="utf-8") as f:
-    # Make sure we strip all comments and options (e.g "--extra-index-url")
-    # that arise from a modified pip.conf file that configure global options
-    # when running kedro build-reqs
-    requires = []
-    for line in f:
-        req = line.split("#", 1)[0].strip()
-        if req and not req.startswith("--"):
-            requires.append(req)
-
-setup(
-    name="{{ cookiecutter.python_package }}",
-    version="0.1",
-    packages=find_packages(exclude=["tests"]),
-    entry_points={"console_scripts": [entry_point]},
-    install_requires=requires,
-    extras_require={
-        "docs": [
-            "docutils<0.18.0",
-            "sphinx~=3.4.3",
-            "sphinx_rtd_theme==0.5.1",
-            "nbsphinx==0.8.1",
-            "nbstripout~=0.4",
-            "sphinx-autodoc-typehints==1.11.1",
-            "sphinx_copybutton==0.3.1",
-            "ipykernel>=5.3, <7.0",
-            "Jinja2<3.1.0",
-            "myst-parser~=0.17.2",
-        ]
-    },
-)
diff --git a/tests/framework/cli/test_starters.py b/tests/framework/cli/test_starters.py
index 26fc6ac3e5..b1fc05433b 100644
--- a/tests/framework/cli/test_starters.py
+++ b/tests/framework/cli/test_starters.py
@@ -17,7 +17,7 @@
     KedroStarterSpec,
 )
 
-FILES_IN_TEMPLATE = 31
+FILES_IN_TEMPLATE = 29
 
 
 @pytest.fixture
@@ -70,9 +70,7 @@ def _assert_template_ok(
     assert (full_path / ".gitignore").is_file()
     assert project_name in (full_path / "README.md").read_text(encoding="utf-8")
     assert "KEDRO" in (full_path / ".gitignore").read_text(encoding="utf-8")
-    assert kedro_version in (full_path / "src" / "requirements.txt").read_text(
-        encoding="utf-8"
-    )
+    assert kedro_version in (full_path / "pyproject.toml").read_text(encoding="utf-8")
     assert (full_path / "src" / python_package / "__init__.py").is_file()