diff --git a/README.md b/README.md
index 7b40e7a..292ab39 100644
--- a/README.md
+++ b/README.md
@@ -28,6 +28,7 @@ The two templates are equivalent with `golang-http` using a structured request/r
 You can manage dependencies in one of the following ways:
 
 * To use Go modules without vendoring, add `--build-arg GO111MODULE=on` to `faas-cli up`, you can also use `--build-arg GOPROXY=https://` if you want to use your own mirror for the modules
+* You can also Go modules with vendoring, run `go mod vendor` in your function folder and add `--build-arg GO111MODULE=on` to `faas-cli up`
 * For traditional vendoring with `dep` give no argument, or add `--build-arg GO111MODULE=off` to `faas-cli up`
 
 ## 1.0 golang-http
@@ -361,7 +362,37 @@ func Handle(w http.ResponseWriter, r *http.Request) {
 }
 ```
 
-#### Advanced usage - Go sub-modules via `GO_REPLACE.txt`
+#### Advanced usage
+
+##### Sub-packages
+
+It is often natural to organize your code into sub-packages, for example you may have a function with the following structure
+
+```
+./echo
+├── go.mod
+├── go.sum
+├── handler.go
+└── pkg
+    └── version
+        └── version.go
+```
+
+First update your go.mod file to replace `handler/function` with your local folder
+
+```go
+go mod edit -replace=handler/function=./
+```
+
+Now if you want to reference the`version` sub-package, import it as
+
+```go
+import "handler/function/pkg/version"
+```
+
+This replacement is handled gracefully by the template at build time and your local development environment will now recognize the sub-package.
+
+##### Go sub-modules
 
 For this example you will need to be using Go 1.13 or newer and Go modules, enable this via `faas-cli build --build-arg GO111MODULE=on`.
 
@@ -384,16 +415,13 @@ func Echo(w http.ResponseWriter, r *http.Request) {
 }
 ```
 
-To include a relative module such as this new `handlers` package, you should create a `GO_REPLACE.txt` file as follows:
+To include a relative module such as this new `handlers` package, you should update your `go.mod` file as follows:
 
 ```
-replace github.com/alexellis/vault/purchase/handlers => ./function/handlers
+go mod edit -replace=github.com/alexellis/vault/purchase/handlers=./handlers
 ```
 
-How did we get to that? Let's say your GOPATH for your GitHub repo is: `github.com/alexellis/vault/` and your OpenFaaS function is `purchase` generated by `faas-cli new purchase --lang golang-middleware`.
-
-Your relative GOPATH is: `github.com/alexellis/vault/purchase`, so add a redirect as per below to redirect the "handlers" package to where it exists in the build container.
-
+At build time, this relative path will be handled correctly inside the template.
 
 Now if you want to reference the handlers package from within your `handler.go` write the following:
 
diff --git a/template/golang-http/Dockerfile b/template/golang-http/Dockerfile
index d882607..80b0579 100644
--- a/template/golang-http/Dockerfile
+++ b/template/golang-http/Dockerfile
@@ -8,41 +8,49 @@ ARG TARGETARCH
 
 RUN apk --no-cache add git
 
-ENV CGO_ENABLED=0
-
 COPY --from=watchdog /fwatchdog /usr/bin/fwatchdog
 RUN chmod +x /usr/bin/fwatchdog
 
+ENV CGO_ENABLED=0
+
 RUN mkdir -p /go/src/handler
 WORKDIR /go/src/handler
 COPY . .
 
+ARG GO111MODULE="off"
+ARG GOPROXY=""
+ARG GOFLAGS=""
+ARG DEBUG=0
+
+# Lift the vendor and go.mod to the main package, cleanup any relative references
+RUN sh modules-cleanup.sh
+
 # Run a gofmt and exclude all vendored code.
 RUN test -z "$(gofmt -l $(find . -type f -name '*.go' -not -path "./vendor/*" -not -path "./function/vendor/*"))" || { echo "Run \"gofmt -s -w\" on your Golang code"; exit 1; }
 
-ARG GO111MODULE="off"
-ARG GOPROXY=""
 
+WORKDIR /go/src/handler/function
+
+RUN GOOS=${TARGETOS} GOARCH=${TARGETARCH} go test ./... -cover
+
+WORKDIR /go/src/handler
 RUN CGO_ENABLED=${CGO_ENABLED} GOOS=${TARGETOS} GOARCH=${TARGETARCH} \
     go build --ldflags "-s -w" -a -installsuffix cgo -o handler .
-RUN GOOS=${TARGETOS} GOARCH=${TARGETARCH} go test handler/function/... -cover
 
 FROM --platform=${TARGETPLATFORM:-linux/amd64} alpine:3.13
 # Add non root user and certs
 RUN apk --no-cache add ca-certificates \
     && addgroup -S app && adduser -S -g app app
-# Split instructions so that buildkit can run & cache 
+# Split instructions so that buildkit can run & cache
 # the previous command ahead of time.
 RUN mkdir -p /home/app \
     && chown app /home/app
 
 WORKDIR /home/app
 
-COPY --from=build /go/src/handler/handler    .
-COPY --from=build /usr/bin/fwatchdog         .
-COPY --from=build /go/src/handler/function/  .
-
-RUN chown -R app /home/app
+COPY --from=build --chown=app /go/src/handler/handler    .
+COPY --from=build --chown=app /usr/bin/fwatchdog         .
+COPY --from=build --chown=app /go/src/handler/function/  .
 
 USER app
 
diff --git a/template/golang-http/modules-cleanup.sh b/template/golang-http/modules-cleanup.sh
new file mode 100644
index 0000000..fcc5354
--- /dev/null
+++ b/template/golang-http/modules-cleanup.sh
@@ -0,0 +1,149 @@
+#!/usr/bin/env sh
+
+set -e
+
+GO111MODULE=$(go env GO111MODULE)
+
+# move_vendor will copy the function's vendor folder,
+# if it exists.
+move_vendor() {
+    if [ ! -d ./function/vendor ]; then
+        echo "vendor not found"
+        return
+    fi
+
+    echo "moving function vendor"
+    mv -f ./function/vendor .
+}
+
+
+# cleanup_gomod will move the function's go module
+cleanup_gomod() {
+
+    # Nothing to do when modules is explicitly off
+    # the z prefix protects against any SH wonkiness
+    # see https://stackoverflow.com/a/18264223
+    if [ "z$GO111MODULE" = "zoff" ]; then
+        echo "modules disabled, skipping go.mod cleanup"
+        return;
+    fi
+
+    if [ ! -f ./function/go.mod ]; then
+        echo "module not initialized, skipping go.mod cleanup"
+        return;
+    fi
+
+    echo "cleaning up go.mod"
+
+    # Copy the user's go.mod
+    mv -f ./function/go.mod .
+    mv -f ./function/go.sum .
+
+    # Clean up the go.mod
+
+    # Cleanup any sub-module replacements.
+    # This requires modifying any replace that points to "./*",
+    # the user has will use this to reference sub-modules instead
+    # of sub-packages, which we cleanup below.
+    echo "cleanup local replace statements"
+    # 1. Replace references to the local folder with `./function`
+    sed -i 's/=> \.\//=> \.\/function\//' go.mod
+
+
+    # Remove any references to the handler/function module.
+    # It is ok to just remove it because we will replace it later.
+    #
+    # Note that these references may or may not exist. We expect the
+    # go.mod to have a replace statement _if_  developer has subpackages
+    # in their handler. In this case they will need a this replace statement
+    #
+    #    replace handler/function => ./
+    #
+    # `go mod` will then add a line that looks like
+    #
+    #    handler/function v0.0.0-00010101000000-000000000000
+    #
+    # both of these lines need to be replaced, this grep selects everything
+    # _except_ those offending lines.
+    grep -v "\shandler/function" go.mod > gomod2; mv gomod2 go.mod
+
+    # Now update the go.mod
+    #
+    # 1. use replace so that imports of handler/function use the local code
+    # 2. we need to rename the module to handler because our main.go assumes
+    #    this is the package name
+    go mod edit \
+        -replace=handler/function=./function \
+        -module handler
+
+
+
+    if [ "$DEBUG" -eq 1 ]; then
+        cat go.mod
+        echo ""
+    fi
+}
+
+
+# cleanup_vendor_modulestxt will cleanup the modules.txt file in the vendor folder
+# this file is needed when modules are enabled and it must be in sync with the
+# go.mod.  To function correctly we need to modify the references to handler/function,
+# if they exist.
+cleanup_vendor_modulestxt() {
+    if [ ! -d ./vendor ]; then
+        echo "no vendor found, skipping modules.txt cleanup"
+        return
+    fi
+
+    # Nothing to do when modules is explicitly off
+    # the z prefix protects against any SH wonkiness
+    # see https://stackoverflow.com/a/18264223
+    if [ "z$GO111MODULE" = "zoff" ]; then
+        echo "modules disabled, skipping modules.txt cleanup"
+        return;
+    fi
+
+    echo "cleanup vendor/modules.txt"
+
+    # just in case
+    touch "./vendor/modules.txt"
+
+    # when vendored, we need to do similar edits to the vendor/modules.txt
+    # as we did to the go.mod
+
+    # 1. we need to replace any possible copy of the handler code
+    rm -rf vendor/handler && \
+
+    # 2. in modules.txt, we remove existing references to the handler/function
+    #    we reconstruct these in the last step
+    grep -v "\shandler/function" ./vendor/modules.txt> modulestext; mv modulestext ./vendor/modules.txt
+
+    # 3. Handle any other local replacements.
+    # any replace that points to `./**` needs to be udpat    echo "cleanup local replace statements"
+    sed -i 's/=> \.\//=> \.\/function\//' ./vendor/modules.txt
+
+    # 4. To make the modules.txt consistent with the new go.mod,
+    #    we add the mising replace to the vendor/modules.txt
+    echo "## explicit" >> ./vendor/modules.txt
+    echo "# handler/function => ./function" >> ./vendor/modules.txt
+
+    if [ "$DEBUG" -eq 1 ]; then
+        cat ./vendor/modules.txt;
+        echo ""
+    fi
+}
+
+# has_local_replacement checks if the file contains local go module replacement
+has_local_replacement() {
+    return "$(grep -E -c '=> \./\S+' "$1")"
+}
+
+
+################
+#   main
+################
+move_vendor
+
+cleanup_gomod
+
+cleanup_vendor_modulestxt
\ No newline at end of file
diff --git a/template/golang-http/vendor/github.com/openfaas/templates-sdk/LICENSE b/template/golang-http/vendor/github.com/openfaas/templates-sdk/LICENSE
deleted file mode 100644
index 7ecb7d7..0000000
--- a/template/golang-http/vendor/github.com/openfaas/templates-sdk/LICENSE
+++ /dev/null
@@ -1,21 +0,0 @@
-MIT License
-
-Copyright (c) 2020 OpenFaaS
-
-Permission is hereby granted, free of charge, to any person obtaining a copy
-of this software and associated documentation files (the "Software"), to deal
-in the Software without restriction, including without limitation the rights
-to use, copy, modify, merge, publish, distribute, sublicense, and/or sell
-copies of the Software, and to permit persons to whom the Software is
-furnished to do so, subject to the following conditions:
-
-The above copyright notice and this permission notice shall be included in all
-copies or substantial portions of the Software.
-
-THE SOFTWARE IS PROVIDED "AS IS", WITHOUT WARRANTY OF ANY KIND, EXPRESS OR
-IMPLIED, INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY,
-FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. IN NO EVENT SHALL THE
-AUTHORS OR COPYRIGHT HOLDERS BE LIABLE FOR ANY CLAIM, DAMAGES OR OTHER
-LIABILITY, WHETHER IN AN ACTION OF CONTRACT, TORT OR OTHERWISE, ARISING FROM,
-OUT OF OR IN CONNECTION WITH THE SOFTWARE OR THE USE OR OTHER DEALINGS IN THE
-SOFTWARE.
diff --git a/template/golang-http/vendor/github.com/openfaas/templates-sdk/go-http/README.md b/template/golang-http/vendor/github.com/openfaas/templates-sdk/go-http/README.md
deleted file mode 100644
index a4a5be7..0000000
--- a/template/golang-http/vendor/github.com/openfaas/templates-sdk/go-http/README.md
+++ /dev/null
@@ -1,41 +0,0 @@
-# go-http SDK
-
-An SDK for building OpenFaaS functions in Go
-
-## Installing
-
-Use `go get` to retrieve the SDK to add it to your `GOPATH` workspace, or
-project's Go module dependencies.
-
-	go get github.com/openfaas/templates-sdk/go-http
-
-To update the SDK use `go get -u` to retrieve the latest version of the SDK.
-
-	go get -u github.com/openfaas/templates-sdk/go-http
-	
-	
-## Features
-
-### Handler definition
-
-```go
-type FunctionHandler interface {
-	Handle(req Request) (Response, error)
-}
-```
-
-`FunctionHandler` interface is used by [golang-http](https://github.com/openfaas-incubator/golang-http-template/tree/master/template/golang-http) template to define a functions handler
-
-### Secrets
-For the time being please use the secrets function from `github.com/openfaas/openfaas-cloud/sdk`
-
-See: https://github.com/openfaas/openfaas-cloud/blob/master/sdk/secrets.go
-
-Usage:
-
-```go
-secret, err := sdk.ReadSecret("MY_SECRET")
-if err != nil {
-    return fmt.Errorf("error reading secret. %v", err)
-}
-```
diff --git a/template/golang-http/vendor/github.com/openfaas/templates-sdk/go-http/handler.go b/template/golang-http/vendor/github.com/openfaas/templates-sdk/go-http/handler.go
deleted file mode 100644
index 4f5d376..0000000
--- a/template/golang-http/vendor/github.com/openfaas/templates-sdk/go-http/handler.go
+++ /dev/null
@@ -1,56 +0,0 @@
-// Copyright (c) Alex Ellis 2018. All rights reserved.
-// Licensed under the MIT license. See LICENSE file in the project root for full license information.
-package handler
-
-import (
-	"context"
-	"net/http"
-)
-
-// Response of function call
-type Response struct {
-
-	// Body the body will be written back
-	Body []byte
-
-	// StatusCode needs to be populated with value such as http.StatusOK
-	StatusCode int
-
-	// Header is optional and contains any additional headers the function response should set
-	Header http.Header
-}
-
-// Request of function call
-type Request struct {
-	Body        []byte
-	Header      http.Header
-	QueryString string
-	Method      string
-	Host        string
-	ctx         context.Context
-}
-
-// Context is set for optional cancellation inflight requests.
-func (r *Request) Context() context.Context {
-	return r.ctx
-}
-
-// WithContext overides the context for the Request struct
-func (r *Request) WithContext(ctx context.Context) {
-	// AE: Not keen on panic mid-flow in user-code, however stdlib also appears to do
-	// this. https://golang.org/src/net/http/request.go
-	// This is not setting a precedent for broader use of "panic" to handle errors.
-	if ctx == nil {
-		panic("nil context")
-	}
-	r.ctx = ctx
-}
-
-// FunctionHandler used for a serverless Go method invocation
-type FunctionHandler interface {
-	Handle(req Request) (Response, error)
-}
-
-func init() {
-
-}
diff --git a/template/golang-http/vendor/modules.txt b/template/golang-http/vendor/modules.txt
deleted file mode 100644
index 08e7770..0000000
--- a/template/golang-http/vendor/modules.txt
+++ /dev/null
@@ -1,2 +0,0 @@
-# github.com/openfaas/templates-sdk v0.0.0-20200723092016-0ebf61253625
-github.com/openfaas/templates-sdk/go-http
diff --git a/template/golang-middleware/Dockerfile b/template/golang-middleware/Dockerfile
index ffaa3c9..91007f4 100644
--- a/template/golang-middleware/Dockerfile
+++ b/template/golang-middleware/Dockerfile
@@ -17,15 +17,16 @@ RUN mkdir -p /go/src/handler
 WORKDIR /go/src/handler
 COPY . .
 
-# Add user overrides to the root go.mod, which is the only place "replace" can be used
-RUN cat function/GO_REPLACE.txt >> ./go.mod || exit 0
-
-# Run a gofmt and exclude all vendored code.
-RUN test -z "$(gofmt -l $(find . -type f -name '*.go' -not -path "./vendor/*" -not -path "./function/vendor/*"))" || { echo "Run \"gofmt -s -w\" on your Golang code"; exit 1; }
-
 ARG GO111MODULE="off"
 ARG GOPROXY=""
 ARG GOFLAGS=""
+ARG DEBUG=0
+
+# Lift the vendor and go.mod to the main package, cleanup any relative references
+RUN sh modules-cleanup.sh
+
+# Run a gofmt and exclude all vendored code.
+RUN test -z "$(gofmt -l $(find . -type f -name '*.go' -not -path "./vendor/*" -not -path "./function/vendor/*"))" || { echo "Run \"gofmt -s -w\" on your Golang code"; exit 1; }
 
 WORKDIR /go/src/handler/function
 
@@ -39,7 +40,7 @@ FROM --platform=${TARGETPLATFORM:-linux/amd64} alpine:3.13
 # Add non root user and certs
 RUN apk --no-cache add ca-certificates \
     && addgroup -S app && adduser -S -g app app
-# Split instructions so that buildkit can run & cache 
+# Split instructions so that buildkit can run & cache
 # the previous command ahead of time.
 RUN mkdir -p /home/app \
     && chown app /home/app
diff --git a/template/golang-middleware/modules-cleanup.sh b/template/golang-middleware/modules-cleanup.sh
new file mode 100644
index 0000000..ab5d458
--- /dev/null
+++ b/template/golang-middleware/modules-cleanup.sh
@@ -0,0 +1,154 @@
+#!/usr/bin/env sh
+
+set -e
+
+GO111MODULE=$(go env GO111MODULE)
+
+# move_vendor will copy the function's vendor folder,
+# if it exists.
+move_vendor() {
+    if [ ! -d ./function/vendor ]; then
+        echo "vendor not found"
+        return
+    fi
+
+    echo "moving function vendor"
+    mv -f ./function/vendor .
+}
+
+
+# cleanup_gomod will move the function's go module
+cleanup_gomod() {
+
+    # Nothing to do when modules is explicitly off
+    # the z prefix protects against any SH wonkiness
+    # see https://stackoverflow.com/a/18264223
+    if [ "z$GO111MODULE" = "zoff" ]; then
+        echo "modules disabled, skipping go.mod cleanup"
+        return;
+    fi
+
+    if [ ! -f ./function/go.mod ]; then
+        echo "module not initialized, skipping go.mod cleanup"
+        return;
+    fi
+
+    echo "cleaning up go.mod"
+
+    # Copy the user's go.mod
+    mv -f ./function/go.mod .
+    mv -f ./function/go.sum .
+
+    # Clean up the go.mod
+
+    # Cleanup any sub-module replacements.
+    # This requires modifying any replace that points to "./*",
+    # the user has will use this to reference sub-modules instead
+    # of sub-packages, which we cleanup below.
+    echo "cleanup local replace statements"
+    # 1. Replace references to the local folder with `./function`
+    sed -i 's/=> \.\//=> \.\/function\//' go.mod
+
+
+    # Remove any references to the handler/function module.
+    # It is ok to just remove it because we will replace it later.
+    #
+    # Note that these references may or may not exist. We expect the
+    # go.mod to have a replace statement _if_  developer has subpackages
+    # in their handler. In this case they will need a this replace statement
+    #
+    #    replace handler/function => ./
+    #
+    # `go mod` will then add a line that looks like
+    #
+    #    handler/function v0.0.0-00010101000000-000000000000
+    #
+    # both of these lines need to be replaced, this grep selects everything
+    # _except_ those offending lines.
+    grep -v "\shandler/function" go.mod > gomod2; mv gomod2 go.mod
+
+    # Now update the go.mod
+    #
+    # 1. use replace so that imports of handler/function use the local code
+    # 2. we need to rename the module to handler because our main.go assumes
+    #    this is the package name
+    go mod edit \
+        -replace=handler/function=./function \
+        -module handler
+
+
+
+    if [ "$DEBUG" -eq 1 ]; then
+        cat go.mod
+        echo ""
+    fi
+}
+
+
+# cleanup_vendor_modulestxt will cleanup the modules.txt file in the vendor folder
+# this file is needed when modules are enabled and it must be in sync with the
+# go.mod.  To function correctly we need to modify the references to handler/function,
+# if they exist.
+cleanup_vendor_modulestxt() {
+    if [ ! -d ./vendor ]; then
+        echo "no vendor found, skipping modules.txt cleanup"
+        return
+    fi
+
+    # Nothing to do when modules is explicitly off
+    # the z prefix protects against any SH wonkiness
+    # see https://stackoverflow.com/a/18264223
+    if [ "z$GO111MODULE" = "zoff" ]; then
+        echo "modules disabled, skipping modules.txt cleanup"
+        return;
+    fi
+
+    if [ -f ./function/go.mod ]; then
+        echo "module not initialized, skipping go.mod cleanup"
+        return;
+    fi
+
+    echo "cleanup vendor/modules.txt"
+
+    # just in case
+    touch "./vendor/modules.txt"
+
+    # when vendored, we need to do similar edits to the vendor/modules.txt
+    # as we did to the go.mod
+
+    # 1. we need to replace any possible copy of the handler code
+    rm -rf vendor/handler && \
+
+    # 2. in modules.txt, we remove existing references to the handler/function
+    #    we reconstruct these in the last step
+    grep -v "\shandler/function" ./vendor/modules.txt> modulestext; mv modulestext ./vendor/modules.txt
+
+    # 3. Handle any other local replacements.
+    # any replace that points to `./**` needs to be udpat    echo "cleanup local replace statements"
+    sed -i 's/=> \.\//=> \.\/function\//' ./vendor/modules.txt
+
+    # 4. To make the modules.txt consistent with the new go.mod,
+    #    we add the mising replace to the vendor/modules.txt
+    echo "## explicit" >> ./vendor/modules.txt
+    echo "# handler/function => ./function" >> ./vendor/modules.txt
+
+    if [ "$DEBUG" -eq 1 ]; then
+        cat ./vendor/modules.txt;
+        echo ""
+    fi
+}
+
+# has_local_replacement checks if the file contains local go module replacement
+has_local_replacement() {
+    return "$(grep -E -c '=> \./\S+' "$1")"
+}
+
+
+################
+#   main
+################
+move_vendor
+
+cleanup_gomod
+
+cleanup_vendor_modulestxt
\ No newline at end of file