diff --git a/.github/workflows/release-please.yaml b/.github/workflows/release-please.yaml
index c6471e0b..2a6ab993 100644
--- a/.github/workflows/release-please.yaml
+++ b/.github/workflows/release-please.yaml
@@ -119,13 +119,24 @@ jobs:
         env:
           NODE_AUTH_TOKEN: ${{secrets.NPM_TOKEN}}
       - if:
-          ${{ steps.release.outputs['packages/functions--release_created'] || github.event_name == 'workflow_dispatch'
-          }}
+          ${{ steps.release.outputs['packages/functions/prod--release_created'] || github.event_name ==
+          'workflow_dispatch' }}
+        run: |
+          if [[ "${{ github.event_name }}" == "workflow_dispatch" ]]; then
+            npm publish packages/functions/prod/ --provenance --access=public || true
+          else
+            npm publish packages/functions/prod/ --provenance --access=public
+          fi
+        env:
+          NODE_AUTH_TOKEN: ${{secrets.NPM_TOKEN}}
+      - if:
+          ${{ steps.release.outputs['packages/functions/dev--release_created'] || github.event_name ==
+          'workflow_dispatch' }}
         run: |
           if [[ "${{ github.event_name }}" == "workflow_dispatch" ]]; then
-            npm publish packages/functions/ --provenance --access=public || true
+            npm publish packages/functions/dev/ --provenance --access=public || true
           else
-            npm publish packages/functions/ --provenance --access=public
+            npm publish packages/functions/dev/ --provenance --access=public
           fi
         env:
           NODE_AUTH_TOKEN: ${{secrets.NPM_TOKEN}}
diff --git a/.release-please-manifest.json b/.release-please-manifest.json
index 640537c3..b1b7f6d8 100644
--- a/.release-please-manifest.json
+++ b/.release-please-manifest.json
@@ -5,7 +5,8 @@
   "packages/dev": "4.6.0",
   "packages/dev-utils": "4.3.0",
   "packages/edge-functions": "2.19.0",
-  "packages/functions": "4.3.0",
+  "packages/functions/prod": "4.3.0",
+  "packages/functions/dev": "0.0.0",
   "packages/headers": "2.1.0",
   "packages/images": "1.3.0",
   "packages/nuxt-module": "0.2.0",
diff --git a/eslint_temporary_suppressions.js b/eslint_temporary_suppressions.js
index 7f9cb443..58d71360 100644
--- a/eslint_temporary_suppressions.js
+++ b/eslint_temporary_suppressions.js
@@ -363,13 +363,13 @@ export default [
     },
   },
   {
-    files: ['packages/functions/dev/events.ts'],
+    files: ['packages/functions/dev/src/events.ts'],
     rules: {
       '@typescript-eslint/no-empty-object-type': 'off',
     },
   },
   {
-    files: ['packages/functions/dev/function.ts'],
+    files: ['packages/functions/dev/src/function.ts'],
     rules: {
       '@typescript-eslint/no-explicit-any': 'off',
       '@typescript-eslint/no-unsafe-assignment': 'off',
@@ -382,14 +382,14 @@ export default [
     },
   },
   {
-    files: ['packages/functions/dev/main.test.ts'],
+    files: ['packages/functions/dev/src/main.test.ts'],
     rules: {
       '@typescript-eslint/no-non-null-assertion': 'off',
       '@typescript-eslint/no-unnecessary-condition': 'off',
     },
   },
   {
-    files: ['packages/functions/dev/main.ts'],
+    files: ['packages/functions/dev/src/main.ts'],
     rules: {
       '@typescript-eslint/prefer-nullish-coalescing': 'off',
       '@typescript-eslint/no-misused-spread': 'off',
@@ -398,7 +398,7 @@ export default [
     },
   },
   {
-    files: ['packages/functions/dev/registry.ts'],
+    files: ['packages/functions/dev/src/registry.ts'],
     rules: {
       '@typescript-eslint/no-explicit-any': 'off',
       '@typescript-eslint/no-unsafe-assignment': 'off',
@@ -412,14 +412,14 @@ export default [
     },
   },
   {
-    files: ['packages/functions/dev/runtimes/index.ts'],
+    files: ['packages/functions/dev/src/runtimes/index.ts'],
     rules: {
       '@typescript-eslint/no-unused-vars': 'off',
       '@typescript-eslint/no-explicit-any': 'off',
     },
   },
   {
-    files: ['packages/functions/dev/runtimes/nodejs/builder.ts'],
+    files: ['packages/functions/dev/src/runtimes/nodejs/builder.ts'],
     rules: {
       '@typescript-eslint/no-unused-vars': 'off',
       'n/no-missing-import': 'off',
@@ -431,13 +431,13 @@ export default [
     },
   },
   {
-    files: ['packages/functions/dev/runtimes/nodejs/config.ts'],
+    files: ['packages/functions/dev/src/runtimes/nodejs/config.ts'],
     rules: {
       '@typescript-eslint/prefer-reduce-type-parameter': 'off',
     },
   },
   {
-    files: ['packages/functions/dev/runtimes/nodejs/index.ts'],
+    files: ['packages/functions/dev/src/runtimes/nodejs/index.ts'],
     rules: {
       '@typescript-eslint/no-unsafe-member-access': 'off',
       '@typescript-eslint/no-unsafe-assignment': 'off',
@@ -447,20 +447,20 @@ export default [
     },
   },
   {
-    files: ['packages/functions/dev/runtimes/nodejs/lambda.ts'],
+    files: ['packages/functions/dev/src/runtimes/nodejs/lambda.ts'],
     rules: {
       '@typescript-eslint/no-unnecessary-condition': 'off',
       '@typescript-eslint/require-await': 'off',
     },
   },
   {
-    files: ['packages/functions/internal.d.ts'],
+    files: ['packages/functions/prod/internal.d.ts'],
     rules: {
       'n/no-missing-import': 'off',
     },
   },
   {
-    files: ['packages/functions/src/function/handler.ts'],
+    files: ['packages/functions/prod/src/function/handler.ts'],
     rules: {
       '@typescript-eslint/prefer-function-type': 'off',
       '@typescript-eslint/no-explicit-any': 'off',
@@ -468,19 +468,19 @@ export default [
     },
   },
   {
-    files: ['packages/functions/src/function/handler_context.ts'],
+    files: ['packages/functions/prod/src/function/handler_context.ts'],
     rules: {
       '@typescript-eslint/no-explicit-any': 'off',
     },
   },
   {
-    files: ['packages/functions/src/function/handler_response.ts'],
+    files: ['packages/functions/prod/src/function/handler_response.ts'],
     rules: {
       '@typescript-eslint/no-explicit-any': 'off',
     },
   },
   {
-    files: ['packages/functions/src/lib/builder.test.ts'],
+    files: ['packages/functions/prod/src/lib/builder.test.ts'],
     rules: {
       'n/no-missing-import': 'off',
       '@typescript-eslint/no-unsafe-assignment': 'off',
@@ -490,7 +490,7 @@ export default [
     },
   },
   {
-    files: ['packages/functions/src/lib/builder.ts'],
+    files: ['packages/functions/prod/src/lib/builder.ts'],
     rules: {
       '@typescript-eslint/no-unnecessary-condition': 'off',
       '@typescript-eslint/prefer-nullish-coalescing': 'off',
@@ -498,7 +498,7 @@ export default [
     },
   },
   {
-    files: ['packages/functions/src/lib/purge_cache.test.ts'],
+    files: ['packages/functions/prod/src/lib/purge_cache.test.ts'],
     rules: {
       'n/no-missing-import': 'off',
       '@typescript-eslint/no-unsafe-assignment': 'off',
@@ -506,7 +506,7 @@ export default [
     },
   },
   {
-    files: ['packages/functions/src/lib/purge_cache.ts'],
+    files: ['packages/functions/prod/src/lib/purge_cache.ts'],
     rules: {
       '@typescript-eslint/no-unnecessary-condition': 'off',
       '@typescript-eslint/prefer-nullish-coalescing': 'off',
@@ -514,13 +514,13 @@ export default [
     },
   },
   {
-    files: ['packages/functions/src/lib/schedule.ts'],
+    files: ['packages/functions/prod/src/lib/schedule.ts'],
     rules: {
       '@typescript-eslint/no-unused-vars': 'off',
     },
   },
   {
-    files: ['packages/functions/src/lib/system_logger.test.ts'],
+    files: ['packages/functions/prod/src/lib/system_logger.test.ts'],
     rules: {
       '@typescript-eslint/no-unsafe-assignment': 'off',
       '@typescript-eslint/no-unsafe-member-access': 'off',
@@ -528,13 +528,13 @@ export default [
     },
   },
   {
-    files: ['packages/functions/src/lib/system_logger.ts'],
+    files: ['packages/functions/prod/src/lib/system_logger.ts'],
     rules: {
       '@typescript-eslint/no-unnecessary-condition': 'off',
     },
   },
   {
-    files: ['packages/functions/test/types/Handler.test-d.ts'],
+    files: ['packages/functions/prod/test/types/Handler.test-d.ts'],
     rules: {
       '@typescript-eslint/no-unused-vars': 'off',
     },
diff --git a/package-lock.json b/package-lock.json
index 4dedfd4c..8de5974a 100644
--- a/package-lock.json
+++ b/package-lock.json
@@ -15,7 +15,8 @@
         "packages/blobs",
         "packages/cache",
         "packages/edge-functions",
-        "packages/functions",
+        "packages/functions/prod",
+        "packages/functions/dev",
         "packages/headers",
         "packages/images",
         "packages/redirects",
@@ -2455,7 +2456,11 @@
       "license": "MIT"
     },
     "node_modules/@netlify/functions": {
-      "resolved": "packages/functions",
+      "resolved": "packages/functions/prod",
+      "link": true
+    },
+    "node_modules/@netlify/functions-dev": {
+      "resolved": "packages/functions/dev",
       "link": true
     },
     "node_modules/@netlify/headers": {
@@ -19370,7 +19375,7 @@
         "@netlify/config": "^23.2.0",
         "@netlify/dev-utils": "4.3.0",
         "@netlify/edge-functions": "2.19.0",
-        "@netlify/functions": "4.3.0",
+        "@netlify/functions-dev": "0.0.0",
         "@netlify/headers": "2.1.0",
         "@netlify/images": "1.3.0",
         "@netlify/redirects": "3.1.0",
@@ -19484,6 +19489,36 @@
         "node": ">=18.0.0"
       }
     },
+    "packages/functions/dev": {
+      "name": "@netlify/functions-dev",
+      "version": "0.0.0",
+      "license": "MIT",
+      "dependencies": {
+        "@netlify/blobs": "10.1.0",
+        "@netlify/dev-utils": "4.3.0",
+        "@netlify/functions": "4.3.0",
+        "@netlify/zip-it-and-ship-it": "^14.1.3",
+        "cron-parser": "^4.9.0",
+        "decache": "^4.6.2",
+        "extract-zip": "^2.0.1",
+        "is-stream": "^4.0.1",
+        "jwt-decode": "^4.0.0",
+        "lambda-local": "^2.2.0",
+        "read-package-up": "^11.0.0",
+        "semver": "^7.6.3",
+        "source-map-support": "^0.5.21"
+      },
+      "devDependencies": {
+        "@types/semver": "^7.5.8",
+        "@types/source-map-support": "^0.5.10",
+        "npm-run-all2": "^5.0.0",
+        "tsup": "^8.0.2",
+        "vitest": "^3.0.0"
+      },
+      "engines": {
+        "node": ">=20.6.1"
+      }
+    },
     "packages/functions/node_modules/ansi-styles": {
       "version": "5.2.0",
       "dev": true,
@@ -19647,6 +19682,24 @@
         "node": ">=8"
       }
     },
+    "packages/functions/prod": {
+      "name": "@netlify/functions",
+      "version": "4.3.0",
+      "license": "MIT",
+      "dependencies": {
+        "@netlify/types": "2.1.0"
+      },
+      "devDependencies": {
+        "npm-run-all2": "^5.0.0",
+        "semver": "^7.6.3",
+        "tsd": "^0.32.0",
+        "tsup": "^8.0.2",
+        "vitest": "^3.0.0"
+      },
+      "engines": {
+        "node": ">=18.0.0"
+      }
+    },
     "packages/headers": {
       "name": "@netlify/headers",
       "version": "2.1.0",
diff --git a/package.json b/package.json
index 63563191..4e8f7321 100644
--- a/package.json
+++ b/package.json
@@ -9,7 +9,8 @@
     "packages/blobs",
     "packages/cache",
     "packages/edge-functions",
-    "packages/functions",
+    "packages/functions/prod",
+    "packages/functions/dev",
     "packages/headers",
     "packages/images",
     "packages/redirects",
diff --git a/packages/dev/package.json b/packages/dev/package.json
index 38a2c114..ccb676aa 100644
--- a/packages/dev/package.json
+++ b/packages/dev/package.json
@@ -56,7 +56,7 @@
     "@netlify/config": "^23.2.0",
     "@netlify/dev-utils": "4.3.0",
     "@netlify/edge-functions": "2.19.0",
-    "@netlify/functions": "4.3.0",
+    "@netlify/functions-dev": "0.0.0",
     "@netlify/headers": "2.1.0",
     "@netlify/images": "1.3.0",
     "@netlify/redirects": "3.1.0",
diff --git a/packages/dev/src/main.ts b/packages/dev/src/main.ts
index 03796f0f..46fcd239 100644
--- a/packages/dev/src/main.ts
+++ b/packages/dev/src/main.ts
@@ -14,7 +14,7 @@ import {
   HTTPServer,
 } from '@netlify/dev-utils'
 import { EdgeFunctionsHandler } from '@netlify/edge-functions/dev'
-import { FunctionsHandler } from '@netlify/functions/dev'
+import { FunctionsHandler } from '@netlify/functions-dev'
 import { HeadersHandler, type HeadersCollector } from '@netlify/headers'
 import { ImageHandler } from '@netlify/images'
 import { RedirectsHandler } from '@netlify/redirects'
diff --git a/packages/functions/.gitignore b/packages/functions/.gitignore
index 399a1f02..1eae0cf6 100644
--- a/packages/functions/.gitignore
+++ b/packages/functions/.gitignore
@@ -1,3 +1,2 @@
-dist
-dist-dev
-node_modules
+dist/
+node_modules/
diff --git a/packages/functions/dev/package.json b/packages/functions/dev/package.json
new file mode 100644
index 00000000..9511c399
--- /dev/null
+++ b/packages/functions/dev/package.json
@@ -0,0 +1,65 @@
+{
+  "name": "@netlify/functions-dev",
+  "main": "./dist/main.js",
+  "types": "./dist/main.d.ts",
+  "type": "module",
+  "exports": {
+    ".": {
+      "import": {
+        "types": "./dist/main.d.ts",
+        "default": "./dist/main.js"
+      }
+    }
+  },
+  "version": "0.0.0",
+  "description": "Local dev emulation of Netlify Functions",
+  "files": [
+    "dist/**/*.js",
+    "dist/**/*.mjs",
+    "dist/**/*.d.ts",
+    "dist/**/*.d.mts"
+  ],
+  "scripts": {
+    "dev": "tsup-node --watch",
+    "build": "tsup-node",
+    "prepack": "npm run build",
+    "test": "vitest run",
+    "test:dev": "vitest"
+  },
+  "keywords": [
+    "netlify",
+    "functions",
+    "serverless"
+  ],
+  "license": "MIT",
+  "repository": "netlify/primitives",
+  "bugs": {
+    "url": "https://github.com/netlify/primitives/issues"
+  },
+  "author": "Netlify Inc.",
+  "dependencies": {
+    "@netlify/blobs": "10.1.0",
+    "@netlify/dev-utils": "4.3.0",
+    "@netlify/functions": "4.3.0",
+    "@netlify/zip-it-and-ship-it": "^14.1.3",
+    "cron-parser": "^4.9.0",
+    "decache": "^4.6.2",
+    "extract-zip": "^2.0.1",
+    "is-stream": "^4.0.1",
+    "jwt-decode": "^4.0.0",
+    "lambda-local": "^2.2.0",
+    "read-package-up": "^11.0.0",
+    "semver": "^7.6.3",
+    "source-map-support": "^0.5.21"
+  },
+  "devDependencies": {
+    "@types/semver": "^7.5.8",
+    "@types/source-map-support": "^0.5.10",
+    "npm-run-all2": "^5.0.0",
+    "tsup": "^8.0.2",
+    "vitest": "^3.0.0"
+  },
+  "engines": {
+    "node": ">=20.6.1"
+  }
+}
diff --git a/packages/functions/dev/builder.ts b/packages/functions/dev/src/builder.ts
similarity index 100%
rename from packages/functions/dev/builder.ts
rename to packages/functions/dev/src/builder.ts
diff --git a/packages/functions/dev/events.ts b/packages/functions/dev/src/events.ts
similarity index 100%
rename from packages/functions/dev/events.ts
rename to packages/functions/dev/src/events.ts
diff --git a/packages/functions/dev/function.ts b/packages/functions/dev/src/function.ts
similarity index 99%
rename from packages/functions/dev/function.ts
rename to packages/functions/dev/src/function.ts
index 9d0cac51..b99e3fd2 100644
--- a/packages/functions/dev/function.ts
+++ b/packages/functions/dev/src/function.ts
@@ -9,7 +9,7 @@ import semver from 'semver'
 
 import { BuildResult } from './builder.js'
 import { Runtime } from './runtimes/index.js'
-import { HandlerContext } from '../src/main.js'
+import { HandlerContext } from '@netlify/functions'
 
 export type FunctionBuildCache = MemoizeCache<FunctionResult>
 
diff --git a/packages/functions/dev/main.test.ts b/packages/functions/dev/src/main.test.ts
similarity index 100%
rename from packages/functions/dev/main.test.ts
rename to packages/functions/dev/src/main.test.ts
diff --git a/packages/functions/dev/main.ts b/packages/functions/dev/src/main.ts
similarity index 100%
rename from packages/functions/dev/main.ts
rename to packages/functions/dev/src/main.ts
diff --git a/packages/functions/dev/registry.ts b/packages/functions/dev/src/registry.ts
similarity index 100%
rename from packages/functions/dev/registry.ts
rename to packages/functions/dev/src/registry.ts
diff --git a/packages/functions/dev/runtimes/index.ts b/packages/functions/dev/src/runtimes/index.ts
similarity index 92%
rename from packages/functions/dev/runtimes/index.ts
rename to packages/functions/dev/src/runtimes/index.ts
index 6310092c..a986f9bb 100644
--- a/packages/functions/dev/runtimes/index.ts
+++ b/packages/functions/dev/src/runtimes/index.ts
@@ -1,4 +1,4 @@
-import type { HandlerResponse } from '../../src/main.js'
+import type { HandlerResponse } from '@netlify/functions'
 import { FunctionBuilder } from '../builder.js'
 import { NetlifyFunction } from '../function.js'
 import { nodeJSRuntime } from './nodejs/index.js'
diff --git a/packages/functions/dev/runtimes/nodejs/builder.ts b/packages/functions/dev/src/runtimes/nodejs/builder.ts
similarity index 98%
rename from packages/functions/dev/runtimes/nodejs/builder.ts
rename to packages/functions/dev/src/runtimes/nodejs/builder.ts
index a1b9fb7b..b5ba4ee9 100644
--- a/packages/functions/dev/runtimes/nodejs/builder.ts
+++ b/packages/functions/dev/src/runtimes/nodejs/builder.ts
@@ -1,4 +1,4 @@
-import { mkdir, mkdtemp, writeFile } from 'node:fs/promises'
+import { writeFile } from 'node:fs/promises'
 import { createRequire } from 'node:module'
 import path from 'node:path'
 
@@ -16,8 +16,6 @@ import { BuildCache, BuildResult, FunctionBuilder } from '../../builder.js'
 
 const require = createRequire(import.meta.url)
 
-const serveFunctionsFolder = path.join('.netlify', 'functions-serve')
-
 const addFunctionsConfigDefaults = (config: FunctionsConfig): FunctionsConfig => ({
   ...config,
   '*': {
diff --git a/packages/functions/dev/runtimes/nodejs/config.ts b/packages/functions/dev/src/runtimes/nodejs/config.ts
similarity index 100%
rename from packages/functions/dev/runtimes/nodejs/config.ts
rename to packages/functions/dev/src/runtimes/nodejs/config.ts
diff --git a/packages/functions/dev/runtimes/nodejs/index.ts b/packages/functions/dev/src/runtimes/nodejs/index.ts
similarity index 98%
rename from packages/functions/dev/runtimes/nodejs/index.ts
rename to packages/functions/dev/src/runtimes/nodejs/index.ts
index 2b7feb1c..6f8cb976 100644
--- a/packages/functions/dev/runtimes/nodejs/index.ts
+++ b/packages/functions/dev/src/runtimes/nodejs/index.ts
@@ -14,7 +14,7 @@ const BLOBS_CONTEXT_VARIABLE = 'NETLIFY_BLOBS_CONTEXT'
 
 lambdaLocal.getLogger().level = 'alert'
 
-import { HandlerEvent, HandlerResponse } from '../../../src/main.js'
+import { HandlerEvent, HandlerResponse } from '@netlify/functions'
 import { lambdaEventFromWebRequest, webResponseFromLambdaResponse } from './lambda.js'
 
 export const nodeJSRuntime: Runtime = {
diff --git a/packages/functions/dev/runtimes/nodejs/lambda.ts b/packages/functions/dev/src/runtimes/nodejs/lambda.ts
similarity index 93%
rename from packages/functions/dev/runtimes/nodejs/lambda.ts
rename to packages/functions/dev/src/runtimes/nodejs/lambda.ts
index 717f9a39..f0844487 100644
--- a/packages/functions/dev/runtimes/nodejs/lambda.ts
+++ b/packages/functions/dev/src/runtimes/nodejs/lambda.ts
@@ -1,6 +1,5 @@
 import { shouldBase64Encode } from '@netlify/dev-utils'
-import { HandlerEvent } from '../../../src/function/handler_event.js'
-import { HandlerResponse } from '../../../src/function/handler_response.js'
+import { HandlerEvent, HandlerResponse } from '@netlify/functions'
 
 export const headersObjectFromWebHeaders = (webHeaders: Headers) => {
   const headers: Record<string, string> = {}
diff --git a/packages/functions/dev/runtimes/nodejs/worker.js b/packages/functions/dev/src/runtimes/nodejs/worker.js
similarity index 100%
rename from packages/functions/dev/runtimes/nodejs/worker.js
rename to packages/functions/dev/src/runtimes/nodejs/worker.js
diff --git a/packages/functions/dev/server/client-context.ts b/packages/functions/dev/src/server/client-context.ts
similarity index 100%
rename from packages/functions/dev/server/client-context.ts
rename to packages/functions/dev/src/server/client-context.ts
diff --git a/packages/functions/tsconfig.json b/packages/functions/dev/tsconfig.json
similarity index 93%
rename from packages/functions/tsconfig.json
rename to packages/functions/dev/tsconfig.json
index 49490e9d..c8b61a25 100644
--- a/packages/functions/tsconfig.json
+++ b/packages/functions/dev/tsconfig.json
@@ -14,5 +14,5 @@
     "skipLibCheck": true,
     "forceConsistentCasingInFileNames": true
   },
-  "include": ["src", "dev"]
+  "include": ["src"]
 }
diff --git a/packages/functions/dev/tsup.config.ts b/packages/functions/dev/tsup.config.ts
new file mode 100644
index 00000000..a5355fb6
--- /dev/null
+++ b/packages/functions/dev/tsup.config.ts
@@ -0,0 +1,16 @@
+import { argv } from 'node:process'
+
+import { defineConfig } from 'tsup'
+
+export default defineConfig({
+  clean: true,
+  outDir: 'dist',
+  entry: ['src/main.ts'],
+  format: ['esm'],
+  dts: true,
+  splitting: false,
+  watch: argv.includes('--watch'),
+  platform: 'node',
+  bundle: true,
+  publicDir: 'src/runtimes/nodejs',
+})
diff --git a/packages/functions/dev/vitest.config.ts b/packages/functions/dev/vitest.config.ts
new file mode 100644
index 00000000..90821230
--- /dev/null
+++ b/packages/functions/dev/vitest.config.ts
@@ -0,0 +1,23 @@
+import { defineConfig } from 'vitest/config'
+
+export default defineConfig({
+  esbuild: {
+    target: 'esnext',
+  },
+  resolve: {
+    alias: {
+      // This fixes a really strange issue where vitest treats the `stream`
+      // specifier as a relative import and fails. It's possible that new
+      // versions of vitest will fix the problem, so you can try to remove
+      // this and check if the tests still pass.
+      stream: 'node:stream',
+    },
+  },
+  test: {
+    include: ['src/**/*.test.ts'],
+    testTimeout: 30_000,
+    typecheck: {
+      enabled: true,
+    },
+  },
+})
diff --git a/packages/functions/CHANGELOG.md b/packages/functions/prod/CHANGELOG.md
similarity index 100%
rename from packages/functions/CHANGELOG.md
rename to packages/functions/prod/CHANGELOG.md
diff --git a/packages/functions/CODE_OF_CONDUCT.md b/packages/functions/prod/CODE_OF_CONDUCT.md
similarity index 100%
rename from packages/functions/CODE_OF_CONDUCT.md
rename to packages/functions/prod/CODE_OF_CONDUCT.md
diff --git a/packages/functions/CONTRIBUTING.md b/packages/functions/prod/CONTRIBUTING.md
similarity index 100%
rename from packages/functions/CONTRIBUTING.md
rename to packages/functions/prod/CONTRIBUTING.md
diff --git a/packages/functions/LICENSE b/packages/functions/prod/LICENSE
similarity index 100%
rename from packages/functions/LICENSE
rename to packages/functions/prod/LICENSE
diff --git a/packages/functions/README.md b/packages/functions/prod/README.md
similarity index 100%
rename from packages/functions/README.md
rename to packages/functions/prod/README.md
diff --git a/packages/functions/functions.png b/packages/functions/prod/functions.png
similarity index 100%
rename from packages/functions/functions.png
rename to packages/functions/prod/functions.png
diff --git a/packages/functions/internal.d.ts b/packages/functions/prod/internal.d.ts
similarity index 100%
rename from packages/functions/internal.d.ts
rename to packages/functions/prod/internal.d.ts
diff --git a/packages/functions/package.json b/packages/functions/prod/package.json
similarity index 70%
rename from packages/functions/package.json
rename to packages/functions/prod/package.json
index 9257815f..2ccce0e7 100644
--- a/packages/functions/package.json
+++ b/packages/functions/prod/package.json
@@ -14,12 +14,6 @@
         "default": "./dist/main.js"
       }
     },
-    "./dev": {
-      "import": {
-        "types": "./dist-dev/main.d.ts",
-        "default": "./dist-dev/main.js"
-      }
-    },
     "./internal": {
       "require": {
         "types": "./dist/internal.d.cts",
@@ -40,12 +34,6 @@
     "dist/**/*.d.ts",
     "dist/**/*.d.cts",
     "dist/**/*.d.mts",
-    "dist-dev/**/*.js",
-    "dist-dev/**/*.cjs",
-    "dist-dev/**/*.mjs",
-    "dist-dev/**/*.d.ts",
-    "dist-dev/**/*.d.cts",
-    "dist-dev/**/*.d.mts",
     "internal.d.ts"
   ],
   "scripts": {
@@ -80,22 +68,9 @@
     "test": "test"
   },
   "dependencies": {
-    "@netlify/blobs": "10.1.0",
-    "@netlify/dev-utils": "4.3.0",
-    "@netlify/types": "2.1.0",
-    "@netlify/zip-it-and-ship-it": "^14.1.3",
-    "cron-parser": "^4.9.0",
-    "decache": "^4.6.2",
-    "extract-zip": "^2.0.1",
-    "is-stream": "^4.0.1",
-    "jwt-decode": "^4.0.0",
-    "lambda-local": "^2.2.0",
-    "read-package-up": "^11.0.0",
-    "source-map-support": "^0.5.21"
+    "@netlify/types": "2.1.0"
   },
   "devDependencies": {
-    "@types/semver": "^7.5.8",
-    "@types/source-map-support": "^0.5.10",
     "npm-run-all2": "^5.0.0",
     "semver": "^7.6.3",
     "tsd": "^0.32.0",
diff --git a/packages/functions/src/function/handler.ts b/packages/functions/prod/src/function/handler.ts
similarity index 100%
rename from packages/functions/src/function/handler.ts
rename to packages/functions/prod/src/function/handler.ts
diff --git a/packages/functions/src/function/handler_context.ts b/packages/functions/prod/src/function/handler_context.ts
similarity index 100%
rename from packages/functions/src/function/handler_context.ts
rename to packages/functions/prod/src/function/handler_context.ts
diff --git a/packages/functions/src/function/handler_event.ts b/packages/functions/prod/src/function/handler_event.ts
similarity index 100%
rename from packages/functions/src/function/handler_event.ts
rename to packages/functions/prod/src/function/handler_event.ts
diff --git a/packages/functions/src/function/handler_response.ts b/packages/functions/prod/src/function/handler_response.ts
similarity index 100%
rename from packages/functions/src/function/handler_response.ts
rename to packages/functions/prod/src/function/handler_response.ts
diff --git a/packages/functions/src/function/index.ts b/packages/functions/prod/src/function/index.ts
similarity index 100%
rename from packages/functions/src/function/index.ts
rename to packages/functions/prod/src/function/index.ts
diff --git a/packages/functions/src/function/v2.ts b/packages/functions/prod/src/function/v2.ts
similarity index 100%
rename from packages/functions/src/function/v2.ts
rename to packages/functions/prod/src/function/v2.ts
diff --git a/packages/functions/src/global-types.test.ts b/packages/functions/prod/src/global-types.test.ts
similarity index 100%
rename from packages/functions/src/global-types.test.ts
rename to packages/functions/prod/src/global-types.test.ts
diff --git a/packages/functions/src/internal.ts b/packages/functions/prod/src/internal.ts
similarity index 100%
rename from packages/functions/src/internal.ts
rename to packages/functions/prod/src/internal.ts
diff --git a/packages/functions/src/lib/builder.test.ts b/packages/functions/prod/src/lib/builder.test.ts
similarity index 100%
rename from packages/functions/src/lib/builder.test.ts
rename to packages/functions/prod/src/lib/builder.test.ts
diff --git a/packages/functions/src/lib/builder.ts b/packages/functions/prod/src/lib/builder.ts
similarity index 100%
rename from packages/functions/src/lib/builder.ts
rename to packages/functions/prod/src/lib/builder.ts
diff --git a/packages/functions/src/lib/consts.ts b/packages/functions/prod/src/lib/consts.ts
similarity index 100%
rename from packages/functions/src/lib/consts.ts
rename to packages/functions/prod/src/lib/consts.ts
diff --git a/packages/functions/src/lib/purge_cache.test.ts b/packages/functions/prod/src/lib/purge_cache.test.ts
similarity index 100%
rename from packages/functions/src/lib/purge_cache.test.ts
rename to packages/functions/prod/src/lib/purge_cache.test.ts
diff --git a/packages/functions/src/lib/purge_cache.ts b/packages/functions/prod/src/lib/purge_cache.ts
similarity index 100%
rename from packages/functions/src/lib/purge_cache.ts
rename to packages/functions/prod/src/lib/purge_cache.ts
diff --git a/packages/functions/src/lib/schedule.ts b/packages/functions/prod/src/lib/schedule.ts
similarity index 100%
rename from packages/functions/src/lib/schedule.ts
rename to packages/functions/prod/src/lib/schedule.ts
diff --git a/packages/functions/src/lib/stream.ts b/packages/functions/prod/src/lib/stream.ts
similarity index 100%
rename from packages/functions/src/lib/stream.ts
rename to packages/functions/prod/src/lib/stream.ts
diff --git a/packages/functions/src/lib/system_logger.test.ts b/packages/functions/prod/src/lib/system_logger.test.ts
similarity index 100%
rename from packages/functions/src/lib/system_logger.test.ts
rename to packages/functions/prod/src/lib/system_logger.test.ts
diff --git a/packages/functions/src/lib/system_logger.ts b/packages/functions/prod/src/lib/system_logger.ts
similarity index 100%
rename from packages/functions/src/lib/system_logger.ts
rename to packages/functions/prod/src/lib/system_logger.ts
diff --git a/packages/functions/src/main.ts b/packages/functions/prod/src/main.ts
similarity index 100%
rename from packages/functions/src/main.ts
rename to packages/functions/prod/src/main.ts
diff --git a/packages/functions/test/helpers/main.mjs b/packages/functions/prod/test/helpers/main.mjs
similarity index 100%
rename from packages/functions/test/helpers/main.mjs
rename to packages/functions/prod/test/helpers/main.mjs
diff --git a/packages/functions/test/helpers/mock_fetch.mjs b/packages/functions/prod/test/helpers/mock_fetch.mjs
similarity index 100%
rename from packages/functions/test/helpers/mock_fetch.mjs
rename to packages/functions/prod/test/helpers/mock_fetch.mjs
diff --git a/packages/functions/test/types/BackgroundHandler.test-d.ts b/packages/functions/prod/test/types/BackgroundHandler.test-d.ts
similarity index 100%
rename from packages/functions/test/types/BackgroundHandler.test-d.ts
rename to packages/functions/prod/test/types/BackgroundHandler.test-d.ts
diff --git a/packages/functions/test/types/Handler.test-d.ts b/packages/functions/prod/test/types/Handler.test-d.ts
similarity index 100%
rename from packages/functions/test/types/Handler.test-d.ts
rename to packages/functions/prod/test/types/Handler.test-d.ts
diff --git a/packages/functions/test/types/Netlify_Global.test-d.ts b/packages/functions/prod/test/types/Netlify_Global.test-d.ts
similarity index 100%
rename from packages/functions/test/types/Netlify_Global.test-d.ts
rename to packages/functions/prod/test/types/Netlify_Global.test-d.ts
diff --git a/packages/functions/prod/tsconfig.json b/packages/functions/prod/tsconfig.json
new file mode 100644
index 00000000..c8b61a25
--- /dev/null
+++ b/packages/functions/prod/tsconfig.json
@@ -0,0 +1,18 @@
+{
+  "compilerOptions": {
+    "target": "ES2022",
+    "module": "esnext",
+    "rootDir": "./",
+    "outDir": "./dist",
+    "allowJs": true,
+    "declaration": true,
+    "esModuleInterop": true,
+    "sourceMap": false,
+    "removeComments": false,
+    "strict": true,
+    "moduleResolution": "node",
+    "skipLibCheck": true,
+    "forceConsistentCasingInFileNames": true
+  },
+  "include": ["src"]
+}
diff --git a/packages/functions/prod/tsup.config.ts b/packages/functions/prod/tsup.config.ts
new file mode 100644
index 00000000..b99bff97
--- /dev/null
+++ b/packages/functions/prod/tsup.config.ts
@@ -0,0 +1,15 @@
+import { argv } from 'node:process'
+
+import { defineConfig } from 'tsup'
+
+export default defineConfig({
+  clean: true,
+  entry: ['src/main.ts', 'src/internal.ts'],
+  outDir: 'dist',
+  format: ['cjs', 'esm'],
+  dts: true,
+  splitting: false,
+  watch: argv.includes('--watch'),
+  platform: 'node',
+  bundle: true,
+})
diff --git a/packages/functions/vitest.config.ts b/packages/functions/prod/vitest.config.ts
similarity index 83%
rename from packages/functions/vitest.config.ts
rename to packages/functions/prod/vitest.config.ts
index 6f0b1819..1f197ac6 100644
--- a/packages/functions/vitest.config.ts
+++ b/packages/functions/prod/vitest.config.ts
@@ -5,7 +5,7 @@ export default defineConfig({
     target: 'esnext',
   },
   test: {
-    include: ['(src|dev)/**/*.test.ts'],
+    include: ['src/**/*.test.ts'],
     testTimeout: 30_000,
     typecheck: {
       enabled: true,
diff --git a/packages/functions/tsup.config.ts b/packages/functions/tsup.config.ts
deleted file mode 100644
index e03812f5..00000000
--- a/packages/functions/tsup.config.ts
+++ /dev/null
@@ -1,29 +0,0 @@
-import { argv } from 'node:process'
-
-import { defineConfig } from 'tsup'
-
-export default defineConfig([
-  {
-    clean: true,
-    entry: ['src/main.ts', 'src/internal.ts'],
-    outDir: 'dist',
-    format: ['cjs', 'esm'],
-    dts: true,
-    splitting: false,
-    watch: argv.includes('--watch'),
-    platform: 'node',
-    bundle: true,
-  },
-  {
-    clean: true,
-    outDir: 'dist-dev',
-    entry: ['dev/main.ts'],
-    format: ['esm'],
-    dts: true,
-    splitting: false,
-    watch: argv.includes('--watch'),
-    platform: 'node',
-    bundle: true,
-    publicDir: 'dev/runtimes/nodejs',
-  },
-])
diff --git a/packages/vite-plugin-tanstack-start/test/support/netlify-deploy.ts b/packages/vite-plugin-tanstack-start/test/support/netlify-deploy.ts
index be72b86d..251c3aca 100644
--- a/packages/vite-plugin-tanstack-start/test/support/netlify-deploy.ts
+++ b/packages/vite-plugin-tanstack-start/test/support/netlify-deploy.ts
@@ -1,5 +1,5 @@
 import { exec as originalExec } from 'node:child_process'
-import { writeFile, readFile, readdir } from 'node:fs/promises'
+import { writeFile, readFile } from 'node:fs/promises'
 import { join } from 'node:path'
 import { URL } from 'node:url'
 import { promisify } from 'node:util'
@@ -8,6 +8,8 @@ import normalizePackageData, { type Package } from 'normalize-package-data'
 
 const exec = promisify(originalExec)
 
+type MonorepoPackage = Package & { workspaces?: string[] }
+
 // https://app.netlify.com/sites/tanstack-start-e2e-tests
 const SITE_ID = process.env.NETLIFY_SITE_ID ?? 'cd4e45ce-895c-432b-af6d-61e10ad1d125'
 
@@ -17,13 +19,15 @@ export interface Deploy {
   logs: string
 }
 
-const packagesRootDir = join(import.meta.dirname, '../../../')
-const packageDirs = await readdir(packagesRootDir)
+const repoRoot = join(import.meta.dirname, '../../../../')
+const workspaces =
+  (JSON.parse(await readFile(join(repoRoot, 'package.json'), 'utf-8')) as MonorepoPackage).workspaces ?? []
+
 const packages = await Promise.all(
-  packageDirs.map(async (dirName) => {
-    const packageJsonPath = join(packagesRootDir, dirName, 'package.json')
+  workspaces.map(async (packageDir) => {
+    const packageJsonPath = join(repoRoot, packageDir, 'package.json')
     const packageJson = JSON.parse(await readFile(packageJsonPath, 'utf-8')) as Package
-    return { name: packageJson.name, dirName }
+    return { name: packageJson.name, packageDir }
   }),
 )
 
@@ -33,7 +37,7 @@ const packages = await Promise.all(
  * We can't use a simpler approach like a monorepo workspace or `npm link` because the fixture site
  * needs to be self-contained to be deployable to Netlify (i.e. it can't have symlinks).
  */
-const prepareDeps = async (cwd: string, packagesAbsoluteDir: string): Promise<void> => {
+const prepareDeps = async (cwd: string): Promise<void> => {
   const packageJson = JSON.parse(await readFile(`${cwd}/package.json`, 'utf-8')) as Package & {
     overrides?: Record<string, string>
   }
@@ -45,7 +49,7 @@ const prepareDeps = async (cwd: string, packagesAbsoluteDir: string): Promise<vo
     const isDevDep = pkg.name in devDependencies
     console.log(`💉 Injecting local ${pkg.name} ${isDevDep ? 'dev ' : ''}dependency`)
     const { stdout } = await exec(`npm pack --json --ignore-scripts --pack-destination ${cwd}`, {
-      cwd: join(packagesAbsoluteDir, pkg.dirName),
+      cwd: join(repoRoot, pkg.packageDir),
     })
     const [{ filename }] = JSON.parse(stdout) as { filename: string }[]
     if (isDep) {
@@ -64,7 +68,7 @@ const prepareDeps = async (cwd: string, packagesAbsoluteDir: string): Promise<vo
 }
 
 export const deploySite = async (projectDir: string): Promise<Deploy> => {
-  await prepareDeps(projectDir, join(import.meta.dirname, '../../../'))
+  await prepareDeps(projectDir)
 
   console.log(`🚀 Building and deploying site...`)
   try {
diff --git a/release-please-config.json b/release-please-config.json
index a8483d7b..7846da08 100644
--- a/release-please-config.json
+++ b/release-please-config.json
@@ -1,7 +1,7 @@
 {
   "$schema": "https://raw.githubusercontent.com/googleapis/release-please/main/schemas/config.json",
   "bootstrap-sha": "1e628be35d2ae079b63ec8e98ca0c6831237b677",
-  "last-release-sha": "1e628be35d2ae079b63ec8e98ca0c6831237b677",
+  "last-release-sha": "ef34aade3b10abee4a330545c8f1ca7c4d084891",
   "plugins": ["node-workspace"],
   "release-type": "node",
   "separate-pull-requests": false,
@@ -12,7 +12,8 @@
     "packages/dev": {},
     "packages/dev-utils": {},
     "packages/edge-functions": {},
-    "packages/functions": {},
+    "packages/functions/dev": {},
+    "packages/functions/prod": {},
     "packages/headers": {},
     "packages/images": {},
     "packages/nuxt-module": {},