diff --git a/docs/source/deployment/airflow_astronomer.md b/docs/source/deployment/airflow_astronomer.md
index 307e9ab903..e084b73530 100644
--- a/docs/source/deployment/airflow_astronomer.md
+++ b/docs/source/deployment/airflow_astronomer.md
@@ -84,7 +84,7 @@ To follow this tutorial, ensure you have the following:
     pip install kedro-airflow~=0.4
     ```
 
-5. Run `pip install -r src/requirements.txt` to install all dependencies.
+5. Run `pip install -r requirements.txt` to install all dependencies.
 
 ### Deployment process
 
diff --git a/docs/source/deployment/aws_step_functions.md b/docs/source/deployment/aws_step_functions.md
index 380f303067..9841fc5af2 100644
--- a/docs/source/deployment/aws_step_functions.md
+++ b/docs/source/deployment/aws_step_functions.md
@@ -55,7 +55,7 @@ The rest of the tutorial will explain each step in the deployment process above
 
 * Create a `conf/aws` directory in your Kedro project
 * Put a `catalog.yml` file in this directory with the following content
-* Ensure that you have `s3fs>=0.3.0,<0.5` defined in your `src/requirements.txt` so the data can be read from S3.
+* Ensure that you have `s3fs>=0.3.0,<0.5` defined in your `requirements.txt` so the data can be read from S3.
 
 <details>
 <summary><b>Click to expand</b></summary>
diff --git a/docs/source/deployment/databricks/databricks_ide_development_workflow.md b/docs/source/deployment/databricks/databricks_ide_development_workflow.md
index dc723189c9..a5f1616c59 100644
--- a/docs/source/deployment/databricks/databricks_ide_development_workflow.md
+++ b/docs/source/deployment/databricks/databricks_ide_development_workflow.md
@@ -184,7 +184,7 @@ Open your newly-created notebook and create **four new cells** inside it. You wi
 1. Before you import and run your Python code, you'll need to install your project's dependencies on the cluster attached to your notebook. Your project has a `requirements.txt` file for this purpose. Add the following code to the first new cell to install the dependencies:
 
 ```ipython
-%pip install -r "/Workspace/Repos/<databricks_username>/iris-databricks/src/requirements.txt"
+%pip install -r "/Workspace/Repos/<databricks_username>/iris-databricks/requirements.txt"
 ```
 
 2. To run your project in your notebook, you must load the Kedro IPython extension. Add the following code to the second new cell to load the IPython extension:
diff --git a/docs/source/deployment/databricks/databricks_notebooks_development_workflow.md b/docs/source/deployment/databricks/databricks_notebooks_development_workflow.md
index 5867163ab9..9f9b513935 100644
--- a/docs/source/deployment/databricks/databricks_notebooks_development_workflow.md
+++ b/docs/source/deployment/databricks/databricks_notebooks_development_workflow.md
@@ -213,7 +213,7 @@ Create **four new cells** inside your notebook. You will fill these cells with c
 1. Before you import and run your Python code, you'll need to install your project's dependencies on the cluster attached to your notebook. Your project has a `requirements.txt` file for this purpose. Add the following code to the first new cell to install the dependencies:
 
 ```ipython
-%pip install -r "/Workspace/Repos/<databricks_username>/iris-databricks/src/requirements.txt"
+%pip install -r "/Workspace/Repos/<databricks_username>/iris-databricks/requirements.txt"
 ```
 
 2. To run your project in your notebook, you must load the Kedro IPython extension. Add the following code to the second new cell to load the IPython extension:
diff --git a/docs/source/deployment/distributed.md b/docs/source/deployment/distributed.md
index 2b005afe42..af49ae5fec 100644
--- a/docs/source/deployment/distributed.md
+++ b/docs/source/deployment/distributed.md
@@ -14,7 +14,7 @@ For better dependency management, we encourage you to containerise the entire pi
 Firstly make sure your [project requirements are up-to-date](../kedro_project_setup/dependencies.md) by running:
 
 ```bash
-pip-compile --output-file=<project_root>/src/requirements.txt --input-file=<project_root>/src/requirements.txt
+pip-compile --output-file=<project_root>/requirements.txt --input-file=<project_root>/requirements.txt
 ```
 
 We then recommend the [`Kedro-Docker`](https://github.com/kedro-org/kedro-plugins/tree/main/kedro-docker) plugin to streamline the process of building the image. [Instructions for using this are in the plugin's README.md](https://github.com/kedro-org/kedro-plugins/blob/main/README.md).
diff --git a/docs/source/deployment/single_machine.md b/docs/source/deployment/single_machine.md
index 0964a6a968..b70ddfcf60 100644
--- a/docs/source/deployment/single_machine.md
+++ b/docs/source/deployment/single_machine.md
@@ -114,7 +114,7 @@ conda install -c conda-forge kedro
 Install the project’s dependencies, by running the following in the project's root directory:
 
 ```console
-pip install -r src/requirements.txt
+pip install -r requirements.txt
 ```
 
 After having installed your project on the remote server you can run the Kedro project as follows from the root of the project:
diff --git a/docs/source/development/commands_reference.md b/docs/source/development/commands_reference.md
index ae2933e256..097984702e 100644
--- a/docs/source/development/commands_reference.md
+++ b/docs/source/development/commands_reference.md
@@ -292,18 +292,18 @@ _This command will be deprecated from Kedro version 0.19.0._
 kedro build-reqs
 ```
 
-This command runs [`pip-compile`](https://github.com/jazzband/pip-tools#example-usage-for-pip-compile) on the project's `src/requirements.txt` file and will create `src/requirements.lock` with the compiled requirements.
+This command runs [`pip-compile`](https://github.com/jazzband/pip-tools#example-usage-for-pip-compile) on the project's `requirements.txt` file and will create `requirements.lock` with the compiled requirements.
 
 `kedro build-reqs` has two optional arguments to specify which file to compile the requirements from and where to save the compiled requirements to. These arguments are `--input-file` and `--output-file` respectively.
 
-`kedro build-reqs` also accepts and passes through CLI options accepted by `pip-compile`. For example, `kedro build-reqs --generate-hashes` will call `pip-compile --output-file=src/requirements.lock --generate-hashes src/requirements.txt`.
+`kedro build-reqs` also accepts and passes through CLI options accepted by `pip-compile`. For example, `kedro build-reqs --generate-hashes` will call `pip-compile --output-file=requirements.lock --generate-hashes requirements.txt`.
 
 #### Install all package dependencies
 
-The following runs [`pip`](https://github.com/pypa/pip) to install all package dependencies specified in `src/requirements.txt`:
+The following runs [`pip`](https://github.com/pypa/pip) to install all package dependencies specified in `requirements.txt`:
 
 ```bash
-pip install -r src/requirements.txt
+pip install -r requirements.txt
 ```
 
 For further information, see the [documentation on installing project-specific dependencies](../kedro_project_setup/dependencies.md#install-project-specific-dependencies).
diff --git a/docs/source/development/linting.md b/docs/source/development/linting.md
index e2c0f31037..263d81f9d7 100644
--- a/docs/source/development/linting.md
+++ b/docs/source/development/linting.md
@@ -23,7 +23,7 @@ and check the [cyclomatic complexity](https://www.ibm.com/docs/en/raa/6.1?topic=
 type. [You can read more in the `isort` documentation](https://pycqa.github.io/isort/).
 
 ### Install the tools
-Install `black`, `flake8`, and `isort` by adding the following lines to your project's `src/requirements.txt`
+Install `black`, `flake8`, and `isort` by adding the following lines to your project's `requirements.txt`
 file:
 ```text
 black # Used for formatting code
@@ -33,7 +33,7 @@ isort # Used for formatting code (sorting module imports)
 To install all the project-specific dependencies, including the linting tools, navigate to the root directory of the
 project and run:
 ```bash
-pip install -r src/requirements.txt
+pip install -r requirements.txt
 ```
 Alternatively, you can individually install the linting tools using the following shell commands:
 ```bash
@@ -72,7 +72,7 @@ These hooks are run before committing your code to your repositories to automati
 making code reviews easier and less time-consuming.
 
 ### Install `pre-commit`
-You can install `pre-commit` along with other dependencies by including it in the `src/requirements.txt` file of your
+You can install `pre-commit` along with other dependencies by including it in the `requirements.txt` file of your
 Kedro project by adding the following line:
 ```text
 pre-commit
diff --git a/docs/source/experiment_tracking/index.md b/docs/source/experiment_tracking/index.md
index 35a5dc053d..bc4db7dcd4 100644
--- a/docs/source/experiment_tracking/index.md
+++ b/docs/source/experiment_tracking/index.md
@@ -72,7 +72,7 @@ cd spaceflights
 Install the project's dependencies:
 
 ```bash
-pip install -r src/requirements.txt
+pip install -r requirements.txt
 ```
 
 ## Set up the session store
@@ -268,17 +268,20 @@ In this section, we illustrate how to compare Matplotlib plots across experiment
 
 ### Update the dependencies
 
-Update the `src/requirements.txt` file in your Kedro project by adding the following dataset to enable Matplotlib for your project:
+Update the `pyproject.toml` file in your Kedro project by adding the following dataset to enable Matplotlib for your project:
 
 ```text
-kedro-datasets[matplotlib.MatplotlibWriter]~=1.1
-seaborn~=0.12.1
+dependencies = [
+    # ...
+    "kedro-datasets[matplotlib.MatplotlibWriter]~=1.1",
+    "seaborn~=0.12.1",
+]
 ```
 
 And install the requirements with:
 
 ```bash
-pip install -r src/requirements.txt
+pip install --editable .
 ```
 
 ### Add a plotting node
diff --git a/docs/source/get_started/new_project.md b/docs/source/get_started/new_project.md
index 1048c49e17..6bdc3cbd86 100644
--- a/docs/source/get_started/new_project.md
+++ b/docs/source/get_started/new_project.md
@@ -11,7 +11,7 @@ There are a few ways to create a new project once you have [set up Kedro](instal
 
 Once you've created a project:
 
-* You need to **navigate to its project folder** and **install its dependencies**: `pip install -r src/requirements.txt`
+* You need to **navigate to its project folder** and **install its dependencies**: `pip install -r requirements.txt`
 * **To run the project**: `kedro run`
 * **To visualise the project**: `kedro viz`
 
@@ -79,7 +79,7 @@ kedro new --starter=pandas-iris
 However you create a Kedro project, once `kedro new` has completed, the next step is to navigate to the project folder (`cd <project-name>`) and install dependencies with `pip` as follows:
 
 ```bash
-pip install -r src/requirements.txt
+pip install -r requirements.txt
 ```
 
 Now run the project:
diff --git a/docs/source/kedro_project_setup/dependencies.md b/docs/source/kedro_project_setup/dependencies.md
index 862ee4e49d..11efd44068 100644
--- a/docs/source/kedro_project_setup/dependencies.md
+++ b/docs/source/kedro_project_setup/dependencies.md
@@ -5,30 +5,33 @@ Both `pip install kedro` and `conda install -c conda-forge kedro` install the co
 When you create a project, you then introduce additional dependencies for the tasks it performs.
 
 ## Project-specific dependencies
-You can specify a project's exact dependencies in the `src/requirements.txt` file to make it easier for you and others to run your project in the future,
-and to avoid version conflicts downstream. This can be achieved with the help of [`pip-tools`](https://pypi.org/project/pip-tools/).
+You can specify a project's exact dependencies in the `pyproject.toml` file,
+as well as any development dependencies in `requirements.txt`,
+to make it easier for you and others to run your project in the future and to avoid version conflicts downstream.
+This can be achieved with the help of [`pip-tools`](https://pypi.org/project/pip-tools/).
+
 To install `pip-tools` in your virtual environment, run the following command:
 ```bash
 pip install pip-tools
 ```
 
-To add or remove dependencies to a project, edit the `src/requirements.txt` file, then run the following:
+To add or remove dependencies to a project, edit the `requirements.txt` file, then run the following:
 
 ```bash
-pip-compile --output-file=<project_root>/src/requirements.txt --input-file=<project_root>/src/requirements.txt
+pip-compile --output-file=<project_root>/requirements.txt --input-file=<project_root>/requirements.txt
 ```
 
 This will [pip compile](https://github.com/jazzband/pip-tools#example-usage-for-pip-compile) the requirements listed in
-the `src/requirements.txt` file into a `src/requirements.lock` that specifies a list of pinned project dependencies
+the `requirements.txt` file into a `requirements.lock` that specifies a list of pinned project dependencies
 (those with a strict version). You can also use this command with additional CLI arguments such as `--generate-hashes`
 to use `pip`'s Hash Checking Mode or `--upgrade-package` to update specific packages to the latest or specific versions.
 [Check out the `pip-tools` documentation](https://pypi.org/project/pip-tools/) for more information.
 
 ```{note}
-The `src/requirements.txt` file contains "source" requirements, while `src/requirements.lock` contains the compiled version of those and requires no manual updates.
+The `requirements.txt` and `pyproject.toml` files contain "source" requirements, while `requirements.lock` contains the compiled version of those and requires no manual updates.
 ```
 
-To further update the project requirements, modify the `src/requirements.txt` file (not `src/requirements.lock`) and re-run the `pip-compile` command above.
+To further update the project requirements, modify the `requirements.txt` file (not `requirements.lock`) and re-run the `pip-compile` command above.
 
 
 ## Install project-specific dependencies
@@ -36,7 +39,7 @@ To further update the project requirements, modify the `src/requirements.txt` fi
 To install the project-specific dependencies, navigate to the root directory of the project and run:
 
 ```bash
-pip install -r src/requirements.txt
+pip install -r requirements.txt
 ```
 
 ## Workflow dependencies
diff --git a/docs/source/kedro_project_setup/starters.md b/docs/source/kedro_project_setup/starters.md
index aac0dc331f..7dbc649af1 100644
--- a/docs/source/kedro_project_setup/starters.md
+++ b/docs/source/kedro_project_setup/starters.md
@@ -155,7 +155,10 @@ Here is the layout of the project as a Cookiecutter template:
 ├── docs                         # Project documentation
 ├── notebooks                    # Project related Jupyter notebooks (can be used for experimental code before moving the code to src)
 ├── README.md                    # Project README
-├── setup.cfg                    # Configuration options for tools e.g. `pytest` or `flake8`
+├── .flake8                      # Configuration options for `flake8`
+├── requirements.txt             # Development dependencies
+├── pyproject.py                 # Package metadata and configuration options for tools
+├── tests                        # Tests
 └── src                          # Project source code
     └── {{ cookiecutter.python_package }}
        ├── __init.py__
@@ -163,9 +166,6 @@ Here is the layout of the project as a Cookiecutter template:
        ├── pipeline_registry.py
        ├── __main__.py
        └── settings.py
-    ├── requirements.txt
-    ├── setup.py
-    └── tests
 ```
 
 ```{note}
diff --git a/docs/source/tutorial/spaceflights_tutorial_faqs.md b/docs/source/tutorial/spaceflights_tutorial_faqs.md
index 92d873dcb9..d23b337f9e 100644
--- a/docs/source/tutorial/spaceflights_tutorial_faqs.md
+++ b/docs/source/tutorial/spaceflights_tutorial_faqs.md
@@ -46,7 +46,7 @@ documentation on how to install relevant dependencies for kedro_datasets.pandas.
 https://kedro.readthedocs.io/en/stable/kedro_project_setup/dependencies.html
 ```
 
-The Kedro Data Catalog is missing [dependencies needed to parse the data](../kedro_project_setup/dependencies.md#install-dependencies-related-to-the-data-catalog). Check that you have [all the project dependencies to `requirements.txt`](./tutorial_template.md#install-project-dependencies) and then call `pip install -r src/requirements.txt` to install them.
+The Kedro Data Catalog is missing [dependencies needed to parse the data](../kedro_project_setup/dependencies.md#install-dependencies-related-to-the-data-catalog). Check that you have [all the project dependencies to `requirements.txt`](./tutorial_template.md#install-project-dependencies) and then call `pip install -r requirements.txt` to install them.
 
 ### Pipeline run
 
diff --git a/docs/source/tutorial/tutorial_template.md b/docs/source/tutorial/tutorial_template.md
index 99b75cb031..9e203ec38d 100644
--- a/docs/source/tutorial/tutorial_template.md
+++ b/docs/source/tutorial/tutorial_template.md
@@ -1,6 +1,6 @@
 # Set up the spaceflights project
 
-This section shows how to create a new project (with `kedro new` using the [Kedro spaceflights starter](https://github.com/kedro-org/kedro-starters/tree/main/spaceflights)) and install project dependencies (with `pip install -r src/requirements.txt`).
+This section shows how to create a new project (with `kedro new` using the [Kedro spaceflights starter](https://github.com/kedro-org/kedro-starters/tree/main/spaceflights)) and install project dependencies (with `pip install -r requirements.txt`).
 
 ## Create a new project
 
@@ -28,7 +28,7 @@ cd spaceflights
 
 Kedro projects have a `requirements.txt` file to specify their dependencies and enable sharable projects by ensuring consistency across Python packages and versions.
 
-The spaceflights project dependencies are stored in `src/requirements.txt`(you may find that the versions differ slightly depending on the version of Kedro):
+The spaceflights project dependencies are stored in `requirements.txt`(you may find that the versions differ slightly depending on the version of Kedro):
 
 ```text
 # code quality packages
@@ -63,7 +63,7 @@ scikit-learn~=1.0
 To install all the project-specific dependencies, run the following from the project root directory:
 
 ```bash
-pip install -r src/requirements.txt
+pip install -r requirements.txt
 ```
 
 ## Optional: logging and configuration
diff --git a/docs/source/visualisation/kedro-viz_visualisation.md b/docs/source/visualisation/kedro-viz_visualisation.md
index 179710c7d0..f6d36fc611 100644
--- a/docs/source/visualisation/kedro-viz_visualisation.md
+++ b/docs/source/visualisation/kedro-viz_visualisation.md
@@ -18,7 +18,7 @@ When prompted for a project name, you can enter anything, but we will assume `Sp
 When your project is ready, navigate to the root directory of the project and install the dependencies for the project, which include Kedro-Viz:
 
 ```bash
-pip install -r src/requirements.txt
+pip install -r requirements.txt
 ```
 
 The next step is optional, but useful to check that all is working. Run the full set of pipelines for the tutorial project:
diff --git a/docs/source/visualisation/visualise_charts_with_plotly.md b/docs/source/visualisation/visualise_charts_with_plotly.md
index 5b14d2c635..59c783c561 100644
--- a/docs/source/visualisation/visualise_charts_with_plotly.md
+++ b/docs/source/visualisation/visualise_charts_with_plotly.md
@@ -27,7 +27,7 @@ There are two types of Plotly datasets supported by Kedro:
 * `plotly.PlotlyDataSet` which only supports [Plotly Express](https://plotly.com/python/plotly-express)
 * `plotly.JSONDataSet` which supports Plotly Express and [Plotly Graph Objects](https://plotly.com/python/graph-objects/)
 
-To use the Plotly datasets, you must update the `requirements.txt` file in the `src` folder of the Kedro project to add the following dependencies:
+To use the Plotly datasets, you must update the `requirements.txt` file in the root folder of the Kedro project to add the following dependencies:
 
 
 ```text
@@ -38,7 +38,7 @@ kedro-datasets[plotly.PlotlyDataSet, plotly.JSONDataSet]~=1.1
 Navigate to the root directory of the project in your terminal and install the dependencies for the tutorial project:
 
 ```bash
-pip install -r src/requirements.txt
+pip install -r requirements.txt
 ```
 
 ### Configure the Data Catalog
@@ -177,11 +177,13 @@ You can view Matplotlib charts in Kedro-Viz when you use the [Kedro MatplotLibWr
 
 ### Update the dependencies
 
-You must update the `src/requirements.txt` file in the Kedro project by adding the following dataset to enable Matplotlib for the project:
+You must update the `pyproject.toml` file in the Kedro project by adding the following dataset to enable Matplotlib for the project:
 
 ```bash
-kedro-datasets[matplotlib.MatplotlibWriter]~=1.1
-seaborn~=0.12.1
+dependencies = [
+    "kedro-datasets[matplotlib.MatplotlibWriter]~=1.1",
+    "seaborn~=0.12.1",
+]
 ```
 
 ### Configure the Data Catalog
diff --git a/features/environment.py b/features/environment.py
index c98246dc85..2b930d03b8 100644
--- a/features/environment.py
+++ b/features/environment.py
@@ -116,13 +116,18 @@ def _setup_minimal_env(context):
 
 def _install_project_requirements(context):
     install_reqs = (
-        Path(
-            "kedro/templates/project/{{ cookiecutter.repo_name }}/src/requirements.txt"
-        )
+        Path("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.append(".[pandas.CSVDataSet]")
+    install_reqs = [
+        req
+        for req in install_reqs
+        if (req.strip())
+        and ("{" not in req)
+        and (not req.startswith("-e"))
+        and (not req.startswith("#"))
+    ]
+    install_reqs.append("kedro-datasets[pandas.CSVDataSet]")
     call([context.pip, "install", *install_reqs], env=context.env)
     return context
diff --git a/features/steps/cli_steps.py b/features/steps/cli_steps.py
index 0008841de4..c0a9453409 100644
--- a/features/steps/cli_steps.py
+++ b/features/steps/cli_steps.py
@@ -162,7 +162,7 @@ def create_config_file(context):
 @given("I have installed the project dependencies")
 def pip_install_dependencies(context):
     """Install project dependencies using pip."""
-    reqs_path = "src/requirements.txt"
+    reqs_path = "requirements.txt"
     res = run(
         [context.pip, "install", "-r", reqs_path],
         env=context.env,
@@ -410,7 +410,7 @@ def update_kedro_req(context: behave.runner.Context):
     """Replace kedro as a standalone requirement with a line
     that includes all of kedro's dependencies (-r kedro/requirements.txt)
     """
-    reqs_path = context.root_project_dir / "src" / "requirements.txt"
+    reqs_path = context.root_project_dir / "requirements.txt"
     kedro_reqs = f"-r {context.requirements_path.as_posix()}"
 
     if reqs_path.is_file():
@@ -428,7 +428,7 @@ def update_kedro_req(context: behave.runner.Context):
 
 @when("I add {dependency} to the requirements")
 def add_req(context: behave.runner.Context, dependency: str):
-    reqs_path = context.root_project_dir / "src" / "requirements.txt"
+    reqs_path = context.root_project_dir / "requirements.txt"
     if reqs_path.is_file():
         reqs_path.write_text(reqs_path.read_text() + "\n" + str(dependency) + "\n")
 
@@ -610,14 +610,14 @@ def check_docs_generated(context: behave.runner.Context):
 @then("requirements should be generated")
 def check_reqs_generated(context: behave.runner.Context):
     """Check that new project requirements are generated."""
-    reqs_path = context.root_project_dir / "src" / "requirements.lock"
+    reqs_path = context.root_project_dir / "requirements.lock"
     assert reqs_path.is_file()
     assert "This file is autogenerated by pip-compile" in reqs_path.read_text()
 
 
 @then("{dependency} should be in the requirements")
 def check_dependency_in_reqs(context: behave.runner.Context, dependency: str):
-    reqs_path = context.root_project_dir / "src" / "requirements.txt"
+    reqs_path = context.root_project_dir / "requirements.txt"
     assert dependency in reqs_path.read_text()
 
 
diff --git a/features/steps/test_starter/{{ cookiecutter.repo_name }}/README.md b/features/steps/test_starter/{{ cookiecutter.repo_name }}/README.md
index 8041d41dd9..b9cb686a00 100644
--- a/features/steps/test_starter/{{ cookiecutter.repo_name }}/README.md	
+++ b/features/steps/test_starter/{{ cookiecutter.repo_name }}/README.md	
@@ -17,12 +17,12 @@ In order to get the best out of the template:
 
 ## How to install dependencies
 
-Declare any dependencies in `src/requirements.txt` for `pip` installation and `src/environment.yml` for `conda` installation.
+Declare any dependencies in `requirements.txt` for `pip` installation.
 
 To install them, run:
 
 ```
-pip install -r src/requirements.txt
+pip install -r requirements.txt
 ```
 
 ## How to run Kedro
@@ -52,9 +52,9 @@ To generate or update the dependency requirements for your project:
 kedro build-reqs
 ```
 
-This will `pip-compile` the contents of `src/requirements.txt` into a new file `src/requirements.lock`. You can see the output of the resolution by opening `src/requirements.lock`.
+This will `pip-compile` the contents of `requirements.txt` into a new file `requirements.lock`. You can see the output of the resolution by opening `requirements.lock`.
 
-After this, if you'd like to update your project requirements, please update `src/requirements.txt` and re-run `kedro build-reqs`.
+After this, if you'd like to update your project requirements, please update `requirements.txt` and re-run `kedro build-reqs`.
 
 [Further information about project dependencies](https://kedro.readthedocs.io/en/stable/kedro_project_setup/dependencies.html#project-specific-dependencies)
 
diff --git a/features/steps/test_starter/{{ cookiecutter.repo_name }}/pyproject.toml b/features/steps/test_starter/{{ cookiecutter.repo_name }}/pyproject.toml
index ca5524efc1..c0cadfe234 100644
--- a/features/steps/test_starter/{{ cookiecutter.repo_name }}/pyproject.toml	
+++ b/features/steps/test_starter/{{ cookiecutter.repo_name }}/pyproject.toml	
@@ -1,7 +1,43 @@
+[build-system]
+requires = ["setuptools"]
+build-backend = "setuptools.build_meta"
+
+[project]
+name = "{{ cookiecutter.python_package }}"
+dependencies = [
+    "kedro~={{ cookiecutter.kedro_version }}",
+    "kedro-datasets[pandas.CSVDataSet]",
+]
+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",
+]
+
+[tool.setuptools.dynamic]
+version = {attr = "{{ cookiecutter.python_package }}.__version__"}
+
+[tool.setuptools.packages.find]
+where = ["src"]
+namespaces = false
+
 [tool.kedro]
-project_name = "{{ cookiecutter.project_name }}"
-project_version = "{{ cookiecutter.kedro_version }}"
 package_name = "{{ cookiecutter.python_package }}"
+project_name = "{{ cookiecutter.project_name }}"
+kedro_init_version = "{{ cookiecutter.kedro_version }}"
 
 [tool.isort]
 profile = "black"
diff --git a/kedro/templates/project/{{ cookiecutter.repo_name }}/src/requirements.txt b/features/steps/test_starter/{{ cookiecutter.repo_name }}/requirements.txt
similarity index 81%
rename from kedro/templates/project/{{ cookiecutter.repo_name }}/src/requirements.txt
rename to features/steps/test_starter/{{ cookiecutter.repo_name }}/requirements.txt
index aa7ee32014..50cf28b712 100644
--- a/kedro/templates/project/{{ cookiecutter.repo_name }}/src/requirements.txt	
+++ b/features/steps/test_starter/{{ cookiecutter.repo_name }}/requirements.txt	
@@ -1,3 +1,7 @@
+# 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 +10,6 @@ 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/features/steps/test_starter/{{ cookiecutter.repo_name }}/src/setup.py b/features/steps/test_starter/{{ cookiecutter.repo_name }}/src/setup.py
deleted file mode 100644
index af5b101519..0000000000
--- a/features/steps/test_starter/{{ cookiecutter.repo_name }}/src/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("-r"):
-            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/features/steps/test_starter/{{ cookiecutter.repo_name }}/src/tests/__init__.py b/features/steps/test_starter/{{ cookiecutter.repo_name }}/tests/__init__.py
similarity index 100%
rename from features/steps/test_starter/{{ cookiecutter.repo_name }}/src/tests/__init__.py
rename to features/steps/test_starter/{{ cookiecutter.repo_name }}/tests/__init__.py
diff --git a/features/steps/test_starter/{{ cookiecutter.repo_name }}/src/tests/pipelines/__init__.py b/features/steps/test_starter/{{ cookiecutter.repo_name }}/tests/pipelines/__init__.py
similarity index 100%
rename from features/steps/test_starter/{{ cookiecutter.repo_name }}/src/tests/pipelines/__init__.py
rename to features/steps/test_starter/{{ cookiecutter.repo_name }}/tests/pipelines/__init__.py
diff --git a/features/steps/test_starter/{{ cookiecutter.repo_name }}/src/tests/test_run.py b/features/steps/test_starter/{{ cookiecutter.repo_name }}/tests/test_run.py
similarity index 100%
rename from features/steps/test_starter/{{ cookiecutter.repo_name }}/src/tests/test_run.py
rename to features/steps/test_starter/{{ cookiecutter.repo_name }}/tests/test_run.py
diff --git a/kedro/framework/cli/micropkg.py b/kedro/framework/cli/micropkg.py
index a2de8c9a16..27ca160f63 100644
--- a/kedro/framework/cli/micropkg.py
+++ b/kedro/framework/cli/micropkg.py
@@ -240,7 +240,7 @@ def _pull_package(
         package_reqs = _get_all_library_reqs(library_meta)
 
         if package_reqs:
-            requirements_txt = metadata.source_dir / "requirements.txt"
+            requirements_txt = metadata.project_path / "requirements.txt"
             _append_package_reqs(requirements_txt, package_reqs, package_name)
 
         _clean_pycache(temp_dir_path)
@@ -664,19 +664,6 @@ def _drop_comment(line):
     return line.partition(" #")[0]
 
 
-def _make_install_requires(requirements_txt: Path) -> list[str]:
-    """Parses each line of requirements.txt into a version specifier valid to put in
-    install_requires.
-    Matches pkg_resources.parse_requirements"""
-    if not requirements_txt.exists():
-        return []
-    return [
-        str(_EquivalentRequirement(_drop_comment(requirement_line)))
-        for requirement_line in requirements_txt.read_text().splitlines()
-        if requirement_line and not requirement_line.startswith("#")
-    ]
-
-
 def _create_nested_package(project: Project, package_path: Path) -> Path:
     # fails if parts of the path exists already
     packages = package_path.parts
@@ -840,9 +827,8 @@ def _generate_sdist_file(
 
         # Build a pyproject.toml on the fly
         try:
-            install_requires = _make_install_requires(
-                package_source / "requirements.txt"  # type: ignore
-            )
+            library_meta = project_wheel_metadata(metadata.project_path)
+            install_requires = _get_all_library_reqs(library_meta)
         except Exception as exc:
             click.secho("FAILED", fg="red")
             cls = exc.__class__
@@ -947,7 +933,7 @@ def _append_package_reqs(
             file.write(sep.join(sorted_reqs))
 
     click.secho(
-        "Use 'kedro build-reqs' to compile and 'pip install -r src/requirements.lock' to install "
+        "Use 'kedro build-reqs' to compile and 'pip install -r requirements.lock' to install "
         "the updated list of requirements."
     )
 
diff --git a/kedro/framework/cli/project.py b/kedro/framework/cli/project.py
index 034b460023..7914a4c9ee 100644
--- a/kedro/framework/cli/project.py
+++ b/kedro/framework/cli/project.py
@@ -32,7 +32,7 @@
 from kedro.utils import load_obj
 
 NO_DEPENDENCY_MESSAGE = """{module} is not installed. Please make sure {module} is in
-{src}/requirements.txt and run 'pip install -r src/requirements.txt'."""
+{src}/requirements.txt and run 'pip install -r requirements.txt'."""
 LINT_CHECK_ONLY_HELP = """Check the files for style guide violations, unsorted /
 unformatted imports, and unblackened Python code without modifying the files."""
 OPEN_ARG_HELP = """Open the documentation in your default browser after building."""
@@ -88,9 +88,9 @@ def test(metadata: ProjectMetadata, args, **kwargs):  # pylint: disable=unused-a
     try:
         _check_module_importable("pytest")
     except KedroCliError as exc:
-        source_path = metadata.source_dir
+        project_path = metadata.project_path
         raise KedroCliError(
-            NO_DEPENDENCY_MESSAGE.format(module="pytest", src=str(source_path))
+            NO_DEPENDENCY_MESSAGE.format(module="pytest", src=str(project_path))
         ) from exc
     python_call("pytest", args)
 
@@ -110,12 +110,14 @@ def lint(
     click.secho(deprecation_message, fg="red")
 
     source_path = metadata.source_dir
+    project_path = metadata.project_path
     package_name = metadata.package_name
-    files = files or (str(source_path / "tests"), str(source_path / package_name))
+    files = files or (str(project_path / "tests"), str(source_path / package_name))
 
     if "PYTHONPATH" not in os.environ:
         # isort needs the source path to be in the 'PYTHONPATH' environment
         # variable to treat it as a first-party import location
+        # NOTE: Actually, `pip install [-e] .` achieves the same
         os.environ["PYTHONPATH"] = str(source_path)  # pragma: no cover
 
     for module_name in ("flake8", "isort", "black"):
@@ -123,7 +125,7 @@ def lint(
             _check_module_importable(module_name)
         except KedroCliError as exc:
             raise KedroCliError(
-                NO_DEPENDENCY_MESSAGE.format(module=module_name, src=str(source_path))
+                NO_DEPENDENCY_MESSAGE.format(module=module_name, src=str(project_path))
             ) from exc
 
     python_call("black", ("--check",) + files if check_only else files)
@@ -149,7 +151,7 @@ def ipython(
 @click.pass_obj  # this will pass the metadata as first argument
 def package(metadata: ProjectMetadata):
     """Package the project as a Python wheel."""
-    source_path = metadata.source_dir
+    project_path = metadata.project_path
     call(
         [
             sys.executable,
@@ -157,9 +159,9 @@ def package(metadata: ProjectMetadata):
             "build",
             "--wheel",
             "--outdir",
-            "../dist",
+            "dist",
         ],
-        cwd=str(source_path),
+        cwd=str(project_path),
     )
 
     directory = (
@@ -199,10 +201,11 @@ def build_docs(metadata: ProjectMetadata, open_docs):
     click.secho(deprecation_message, fg="red")
 
     source_path = metadata.source_dir
+    project_path = metadata.project_path
     package_name = metadata.package_name
 
-    python_call("pip", ["install", str(source_path / "[docs]")])
-    python_call("pip", ["install", "-r", str(source_path / "requirements.txt")])
+    python_call("pip", ["install", str(project_path / "[docs]")])
+    python_call("pip", ["install", "-r", str(project_path / "requirements.txt")])
     python_call("ipykernel", ["install", "--user", f"--name={package_name}"])
     shutil.rmtree("docs/build", ignore_errors=True)
     call(
@@ -239,8 +242,8 @@ def build_docs(metadata: ProjectMetadata, open_docs):
 def build_reqs(
     metadata: ProjectMetadata, input_file, output_file, args, **kwargs
 ):  # pylint: disable=unused-argument
-    """Run `pip-compile` on src/requirements.txt or the user defined input file and save
-    the compiled requirements to src/requirements.lock or the user defined output file.
+    """Run `pip-compile` on requirements.txt or the user defined input file and save
+    the compiled requirements to requirements.lock or the user defined output file.
     (DEPRECATED)
     """
     deprecation_message = (
@@ -249,9 +252,9 @@ def build_reqs(
     )
     click.secho(deprecation_message, fg="red")
 
-    source_path = metadata.source_dir
-    input_file = Path(input_file or source_path / "requirements.txt")
-    output_file = Path(output_file or source_path / "requirements.lock")
+    project_path = metadata.project_path
+    input_file = Path(input_file or project_path / "requirements.txt")
+    output_file = Path(output_file or project_path / "requirements.lock")
 
     if input_file.is_file():
         python_call(
@@ -291,7 +294,7 @@ def activate_nbstripout(
     )
     click.secho(deprecation_message, fg="red")
 
-    source_path = metadata.source_dir
+    project_path = metadata.source_dir
     click.secho(
         (
             "Notebook output cells will be automatically cleared before committing"
@@ -304,7 +307,7 @@ def activate_nbstripout(
         _check_module_importable("nbstripout")
     except KedroCliError as exc:
         raise KedroCliError(
-            NO_DEPENDENCY_MESSAGE.format(module="nbstripout", src=str(source_path))
+            NO_DEPENDENCY_MESSAGE.format(module="nbstripout", src=str(project_path))
         ) from exc
 
     try:
diff --git a/kedro/framework/cli/starters.py b/kedro/framework/cli/starters.py
index 77491d391f..db3a24a321 100644
--- a/kedro/framework/cli/starters.py
+++ b/kedro/framework/cli/starters.py
@@ -371,7 +371,7 @@ def _create_project(template_path: str, cookiecutter_args: dict[str, Any]):
     )
     click.secho(
         "\nA best-practice setup includes initialising git and creating "
-        "a virtual environment before running 'pip install -r src/requirements.txt' to install "
+        "a virtual environment before running 'pip install -r requirements.txt' to install "
         "project-specific dependencies. Refer to the Kedro documentation: "
         "https://kedro.readthedocs.io/"
     )
diff --git a/kedro/framework/cli/utils.py b/kedro/framework/cli/utils.py
index bd1c59a2ec..2eb47665d4 100644
--- a/kedro/framework/cli/utils.py
+++ b/kedro/framework/cli/utils.py
@@ -354,7 +354,7 @@ def _check_module_importable(module_name: str) -> None:
     except ImportError as exc:
         raise KedroCliError(
             f"Module '{module_name}' not found. Make sure to install required project "
-            f"dependencies by running the 'pip install -r src/requirements.txt' command first."
+            f"dependencies by running the 'pip install -r requirements.txt' command first."
         ) from exc
 
 
diff --git a/kedro/templates/project/{{ cookiecutter.repo_name }}/setup.cfg b/kedro/templates/project/{{ cookiecutter.repo_name }}/.flake8
similarity index 100%
rename from kedro/templates/project/{{ cookiecutter.repo_name }}/setup.cfg
rename to kedro/templates/project/{{ cookiecutter.repo_name }}/.flake8
diff --git a/kedro/templates/project/{{ cookiecutter.repo_name }}/README.md b/kedro/templates/project/{{ cookiecutter.repo_name }}/README.md
index 07ae44d46c..1531726699 100644
--- a/kedro/templates/project/{{ cookiecutter.repo_name }}/README.md	
+++ b/kedro/templates/project/{{ cookiecutter.repo_name }}/README.md	
@@ -17,12 +17,18 @@ In order to get the best out of the template:
 
 ## How to install dependencies
 
-Declare any dependencies in `src/requirements.txt` for `pip` installation and `src/environment.yml` for `conda` installation.
+Declare any library dependencies in `pyproject.toml`, and any development dependencies in `requirements.txt`.
 
-To install them, run:
+To install all of them, run:
 
 ```
-pip install -r src/requirements.txt
+pip install -r requirements.txt
+```
+
+To install only the library dependencies, run:
+
+```
+pip install --editable .
 ```
 
 ## How to run your Kedro pipeline
@@ -35,7 +41,7 @@ kedro run
 
 ## How to test your Kedro project
 
-Have a look at the file `src/tests/test_run.py` for instructions on how to write your tests. You can run your tests as follows:
+Have a look at the file `tests/test_run.py` for instructions on how to write your tests. You can run your tests as follows:
 
 ```
 kedro test
@@ -51,9 +57,9 @@ To generate or update the dependency requirements for your project:
 kedro build-reqs
 ```
 
-This will `pip-compile` the contents of `src/requirements.txt` into a new file `src/requirements.lock`. You can see the output of the resolution by opening `src/requirements.lock`.
+This will `pip-compile` the contents of `requirements.txt` into a new file `requirements.lock`. You can see the output of the resolution by opening `requirements.lock`.
 
-After this, if you'd like to update your project requirements, please update `src/requirements.txt` and re-run `kedro build-reqs`.
+After this, if you'd like to update your project requirements, please update `pyproject.toml` or `requirements.txt` and re-run `kedro build-reqs`.
 
 [Further information about project dependencies](https://docs.kedro.org/en/stable/kedro_project_setup/dependencies.html#project-specific-dependencies)
 
@@ -61,15 +67,9 @@ After this, if you'd like to update your project requirements, please update `sr
 
 > Note: Using `kedro jupyter` or `kedro ipython` to run your notebook provides these variables in scope: `context`, `catalog`, and `startup_error`.
 >
-> Jupyter, JupyterLab, and IPython are already included in the project requirements by default, so once you have run `pip install -r src/requirements.txt` you will not need to take any extra steps before you use them.
+> Jupyter, JupyterLab, and IPython are already included as development dependencies of the project 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 +77,6 @@ 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..f39867c572 100644
--- a/kedro/templates/project/{{ cookiecutter.repo_name }}/pyproject.toml	
+++ b/kedro/templates/project/{{ cookiecutter.repo_name }}/pyproject.toml	
@@ -1,3 +1,38 @@
+[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",
+]
+
+[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/features/steps/test_starter/{{ cookiecutter.repo_name }}/src/requirements.txt b/kedro/templates/project/{{ cookiecutter.repo_name }}/requirements.txt
similarity index 76%
rename from features/steps/test_starter/{{ cookiecutter.repo_name }}/src/requirements.txt
rename to kedro/templates/project/{{ cookiecutter.repo_name }}/requirements.txt
index 7e6f29ac16..50cf28b712 100644
--- a/features/steps/test_starter/{{ cookiecutter.repo_name }}/src/requirements.txt	
+++ b/kedro/templates/project/{{ cookiecutter.repo_name }}/requirements.txt	
@@ -1,3 +1,7 @@
+# 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 +10,6 @@ isort~=5.0
 jupyter~=1.0
 jupyterlab_server>=2.11.1, <2.16.0
 jupyterlab~=3.0, <3.6.0
-kedro[pandas.CSVDataSet]=={{ 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 }}/src/setup.py b/kedro/templates/project/{{ cookiecutter.repo_name }}/src/setup.py
deleted file mode 100644
index 8e62d661f8..0000000000
--- a/kedro/templates/project/{{ cookiecutter.repo_name }}/src/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/kedro/templates/project/{{ cookiecutter.repo_name }}/src/tests/__init__.py b/kedro/templates/project/{{ cookiecutter.repo_name }}/tests/__init__.py
similarity index 100%
rename from kedro/templates/project/{{ cookiecutter.repo_name }}/src/tests/__init__.py
rename to kedro/templates/project/{{ cookiecutter.repo_name }}/tests/__init__.py
diff --git a/kedro/templates/project/{{ cookiecutter.repo_name }}/src/tests/pipelines/__init__.py b/kedro/templates/project/{{ cookiecutter.repo_name }}/tests/pipelines/__init__.py
similarity index 100%
rename from kedro/templates/project/{{ cookiecutter.repo_name }}/src/tests/pipelines/__init__.py
rename to kedro/templates/project/{{ cookiecutter.repo_name }}/tests/pipelines/__init__.py
diff --git a/kedro/templates/project/{{ cookiecutter.repo_name }}/src/tests/test_run.py b/kedro/templates/project/{{ cookiecutter.repo_name }}/tests/test_run.py
similarity index 100%
rename from kedro/templates/project/{{ cookiecutter.repo_name }}/src/tests/test_run.py
rename to kedro/templates/project/{{ cookiecutter.repo_name }}/tests/test_run.py
diff --git a/tests/framework/cli/micropkg/conftest.py b/tests/framework/cli/micropkg/conftest.py
index ff8348b755..faf7b13e91 100644
--- a/tests/framework/cli/micropkg/conftest.py
+++ b/tests/framework/cli/micropkg/conftest.py
@@ -26,7 +26,7 @@ def cleanup_micropackages(fake_repo_path, fake_package_path):
             if each.is_file():
                 each.unlink()
 
-        tests = fake_repo_path / "src" / "tests" / micropackage
+        tests = fake_repo_path / "tests" / micropackage
         if tests.is_dir():
             shutil.rmtree(str(tests))
 
@@ -35,7 +35,7 @@ def cleanup_micropackages(fake_repo_path, fake_package_path):
 def cleanup_pipelines(fake_repo_path, fake_package_path):
     pipes_path = fake_package_path / "pipelines"
     old_pipelines = {p.name for p in pipes_path.iterdir() if p.is_dir()}
-    requirements_txt = fake_repo_path / "src" / "requirements.txt"
+    requirements_txt = fake_repo_path / "requirements.txt"
     requirements = requirements_txt.read_text()
     yield
 
@@ -53,7 +53,7 @@ def cleanup_pipelines(fake_repo_path, fake_package_path):
             if each.is_file():
                 each.unlink()
 
-        tests = fake_repo_path / "src" / "tests" / "pipelines" / pipeline
+        tests = fake_repo_path / "tests" / "pipelines" / pipeline
         if tests.is_dir():
             shutil.rmtree(str(tests))
 
diff --git a/tests/framework/cli/micropkg/test_micropkg_requirements.py b/tests/framework/cli/micropkg/test_micropkg_requirements.py
index b0070a1bee..845f08c0d2 100644
--- a/tests/framework/cli/micropkg/test_micropkg_requirements.py
+++ b/tests/framework/cli/micropkg/test_micropkg_requirements.py
@@ -81,7 +81,10 @@ def test_existing_complex_project_requirements_txt(
         self, fake_project_cli, fake_metadata, fake_package_path, fake_repo_path
     ):
         """Pipeline requirements.txt and project requirements.txt."""
-        project_requirements_txt = fake_repo_path / "src" / "requirements.txt"
+        # FIXME: This assumes that requirements live in `requirements.txt`,
+        # but in the new project template they are split
+        # between `pyproject.toml` (library deps) and `requirements.txt` (development deps)
+        project_requirements_txt = fake_repo_path / "requirements.txt"
         with open(project_requirements_txt, "a", encoding="utf-8") as file:
             file.write(COMPLEX_REQUIREMENTS)
         existing_requirements = _safe_parse_requirements(
@@ -112,7 +115,7 @@ def test_existing_project_requirements_txt(
         self, fake_project_cli, fake_metadata, fake_package_path, fake_repo_path
     ):
         """Pipeline requirements.txt and project requirements.txt."""
-        project_requirements_txt = fake_repo_path / "src" / "requirements.txt"
+        project_requirements_txt = fake_repo_path / "requirements.txt"
         existing_requirements = _safe_parse_requirements(
             project_requirements_txt.read_text()
         )
@@ -146,7 +149,7 @@ def test_missing_project_requirements_txt(
         project level."""
 
         # Remove project requirements.txt
-        project_requirements_txt = fake_repo_path / "src" / "requirements.txt"
+        project_requirements_txt = fake_repo_path / "requirements.txt"
         project_requirements_txt.unlink()
 
         self.call_pipeline_create(fake_project_cli, fake_metadata)
@@ -176,7 +179,7 @@ def test_no_requirements(
         """No pipeline requirements.txt, and also no requirements.txt
         at project level."""
         # Remove project requirements.txt
-        project_requirements_txt = fake_repo_path / "src" / "requirements.txt"
+        project_requirements_txt = fake_repo_path / "requirements.txt"
         project_requirements_txt.unlink()
 
         self.call_pipeline_create(fake_project_cli, fake_metadata)
@@ -195,7 +198,7 @@ def test_all_requirements_already_covered(
         pipeline_requirements_txt = (
             fake_package_path / "pipelines" / PIPELINE_NAME / "requirements.txt"
         )
-        project_requirements_txt = fake_repo_path / "src" / "requirements.txt"
+        project_requirements_txt = fake_repo_path / "requirements.txt"
         pipeline_requirements_txt.write_text(SIMPLE_REQUIREMENTS)
         project_requirements_txt.write_text(SIMPLE_REQUIREMENTS)
 
@@ -214,7 +217,7 @@ def test_no_pipeline_requirements_txt(
         create project requirements.txt."""
 
         # Remove project requirements.txt
-        project_requirements_txt = fake_repo_path / "src" / "requirements.txt"
+        project_requirements_txt = fake_repo_path / "requirements.txt"
         project_requirements_txt.unlink()
 
         self.call_pipeline_create(fake_project_cli, fake_metadata)
@@ -231,7 +234,7 @@ def test_empty_pipeline_requirements_txt(
         create project requirements.txt."""
 
         # Remove project requirements.txt
-        project_requirements_txt = fake_repo_path / "src" / "requirements.txt"
+        project_requirements_txt = fake_repo_path / "requirements.txt"
         project_requirements_txt.unlink()
 
         self.call_pipeline_create(fake_project_cli, fake_metadata)
diff --git a/tests/framework/cli/pipeline/conftest.py b/tests/framework/cli/pipeline/conftest.py
index f934ab6939..79480ae1ca 100644
--- a/tests/framework/cli/pipeline/conftest.py
+++ b/tests/framework/cli/pipeline/conftest.py
@@ -26,7 +26,7 @@ def cleanup_micropackages(fake_repo_path, fake_package_path):
             if each.is_file():
                 each.unlink()
 
-        tests = fake_repo_path / "src" / "tests" / micropackage
+        tests = fake_repo_path / "tests" / micropackage
         if tests.is_dir():
             shutil.rmtree(str(tests))
 
@@ -35,7 +35,7 @@ def cleanup_micropackages(fake_repo_path, fake_package_path):
 def cleanup_pipelines(fake_repo_path, fake_package_path):
     pipes_path = fake_package_path / "pipelines"
     old_pipelines = {p.name for p in pipes_path.iterdir() if p.is_dir()}
-    requirements_txt = fake_repo_path / "src" / "requirements.txt"
+    requirements_txt = fake_repo_path / "requirements.txt"
     requirements = requirements_txt.read_text()
     yield
 
@@ -58,7 +58,7 @@ def cleanup_pipelines(fake_repo_path, fake_package_path):
                 if dirpath.is_dir() and not any(dirpath.iterdir()):
                     dirpath.rmdir()
 
-        tests = fake_repo_path / "src" / "tests" / "pipelines" / pipeline
+        tests = fake_repo_path / "tests" / "pipelines" / pipeline
         if tests.is_dir():
             shutil.rmtree(str(tests))
 
diff --git a/tests/framework/cli/pipeline/test_pipeline.py b/tests/framework/cli/pipeline/test_pipeline.py
index 4bdd965526..07038c9e31 100644
--- a/tests/framework/cli/pipeline/test_pipeline.py
+++ b/tests/framework/cli/pipeline/test_pipeline.py
@@ -19,7 +19,7 @@
 @pytest.fixture(params=["base"])
 def make_pipelines(request, fake_repo_path, fake_package_path, mocker):
     source_path = fake_package_path / "pipelines" / PIPELINE_NAME
-    tests_path = fake_repo_path / "src" / "tests" / "pipelines" / PIPELINE_NAME
+    tests_path = fake_repo_path / "tests" / "pipelines" / PIPELINE_NAME
     conf_path = fake_repo_path / settings.CONF_SOURCE / request.param / "parameters"
 
     for path in (source_path, tests_path, conf_path):
@@ -72,7 +72,7 @@ def test_create_pipeline(  # pylint: disable=too-many-locals
         assert actual_configs == expected_configs
 
         # tests
-        test_dir = fake_repo_path / "src" / "tests" / "pipelines" / PIPELINE_NAME
+        test_dir = fake_repo_path / "tests" / "pipelines" / PIPELINE_NAME
         expected_files = {"__init__.py", "test_pipeline.py"}
         actual_files = {f.name for f in test_dir.iterdir()}
         assert actual_files == expected_files
@@ -94,7 +94,7 @@ def test_create_pipeline_skip_config(
         conf_dirs = list((fake_repo_path / settings.CONF_SOURCE).rglob(PIPELINE_NAME))
         assert conf_dirs == []  # no configs created for the pipeline
 
-        test_dir = fake_repo_path / "src" / "tests" / "pipelines" / PIPELINE_NAME
+        test_dir = fake_repo_path / "tests" / "pipelines" / PIPELINE_NAME
         assert test_dir.is_dir()
 
     def test_catalog_and_params(  # pylint: disable=too-many-locals
@@ -151,12 +151,7 @@ def test_skip_copy(self, fake_repo_path, fake_project_cli, fake_metadata):
 
         # create __init__.py in tests
         tests_init = (
-            fake_repo_path
-            / "src"
-            / "tests"
-            / "pipelines"
-            / PIPELINE_NAME
-            / "__init__.py"
+            fake_repo_path / "tests" / "pipelines" / PIPELINE_NAME / "__init__.py"
         )
         tests_init.parent.mkdir(parents=True)
         tests_init.touch()
@@ -268,7 +263,7 @@ def test_delete_pipeline(
         )
 
         source_path = fake_package_path / "pipelines" / PIPELINE_NAME
-        tests_path = fake_repo_path / "src" / "tests" / "pipelines" / PIPELINE_NAME
+        tests_path = fake_repo_path / "tests" / "pipelines" / PIPELINE_NAME
         params_path = (
             fake_repo_path
             / settings.CONF_SOURCE
@@ -304,7 +299,7 @@ def test_delete_pipeline_skip(
             ["pipeline", "delete", "-y", PIPELINE_NAME],
             obj=fake_metadata,
         )
-        tests_path = fake_repo_path / "src" / "tests" / "pipelines" / PIPELINE_NAME
+        tests_path = fake_repo_path / "tests" / "pipelines" / PIPELINE_NAME
         params_path = (
             fake_repo_path
             / settings.CONF_SOURCE
@@ -396,7 +391,7 @@ def test_pipeline_delete_confirmation(
         )
 
         source_path = fake_package_path / "pipelines" / PIPELINE_NAME
-        tests_path = fake_repo_path / "src" / "tests" / "pipelines" / PIPELINE_NAME
+        tests_path = fake_repo_path / "tests" / "pipelines" / PIPELINE_NAME
         params_path = (
             fake_repo_path
             / settings.CONF_SOURCE
@@ -437,7 +432,7 @@ def test_pipeline_delete_confirmation_skip(
             obj=fake_metadata,
         )
 
-        tests_path = fake_repo_path / "src" / "tests" / "pipelines" / PIPELINE_NAME
+        tests_path = fake_repo_path / "tests" / "pipelines" / PIPELINE_NAME
         params_path = (
             fake_repo_path
             / settings.CONF_SOURCE
diff --git a/tests/framework/cli/test_jupyter.py b/tests/framework/cli/test_jupyter.py
index d5e0b5dbd3..5e5956e456 100644
--- a/tests/framework/cli/test_jupyter.py
+++ b/tests/framework/cli/test_jupyter.py
@@ -47,7 +47,7 @@ def test_fail_no_jupyter(self, fake_project_cli, mocker):
         assert result.exit_code
         error = (
             "Module 'notebook' not found. Make sure to install required project "
-            "dependencies by running the 'pip install -r src/requirements.txt' command first."
+            "dependencies by running the 'pip install -r requirements.txt' command first."
         )
         assert error in result.output
 
@@ -97,7 +97,7 @@ def test_fail_no_jupyter(self, fake_project_cli, mocker):
         assert result.exit_code
         error = (
             "Module 'notebook' not found. Make sure to install required project "
-            "dependencies by running the 'pip install -r src/requirements.txt' command first."
+            "dependencies by running the 'pip install -r requirements.txt' command first."
         )
         assert error in result.output
 
@@ -147,7 +147,7 @@ def test_fail_no_jupyter(self, fake_project_cli, mocker):
         assert result.exit_code
         error = (
             "Module 'jupyterlab' not found. Make sure to install required project "
-            "dependencies by running the 'pip install -r src/requirements.txt' command first."
+            "dependencies by running the 'pip install -r requirements.txt' command first."
         )
         assert error in result.output
 
diff --git a/tests/framework/cli/test_project.py b/tests/framework/cli/test_project.py
index 92e0d024cd..e71440698e 100644
--- a/tests/framework/cli/test_project.py
+++ b/tests/framework/cli/test_project.py
@@ -121,7 +121,7 @@ def test_pytest_not_installed(
             fake_project_cli, ["test", "--random-arg", "value"], obj=fake_metadata
         )
         expected_message = NO_DEPENDENCY_MESSAGE.format(
-            module="pytest", src=str(fake_repo_path / "src")
+            module="pytest", src=str(fake_repo_path)
         )
 
         assert result.exit_code
@@ -148,7 +148,7 @@ def test_lint(
         assert not result.exit_code, result.stdout
 
         expected_files = files or (
-            str(fake_repo_path / "src/tests"),
+            str(fake_repo_path / "tests"),
             str(fake_repo_path / "src/dummy_package"),
         )
         expected_calls = [
@@ -185,7 +185,7 @@ def test_lint_check_only(
         assert not result.exit_code, result.stdout
 
         expected_files = files or (
-            str(fake_repo_path / "src/tests"),
+            str(fake_repo_path / "tests"),
             str(fake_repo_path / "src/dummy_package"),
         )
         expected_calls = [
@@ -217,7 +217,7 @@ def test_import_not_installed(
 
         result = CliRunner().invoke(fake_project_cli, ["lint"], obj=fake_metadata)
         expected_message = NO_DEPENDENCY_MESSAGE.format(
-            module=module_name, src=str(fake_repo_path / "src")
+            module=module_name, src=str(fake_repo_path)
         )
 
         assert result.exit_code, result.stdout
@@ -279,7 +279,7 @@ def test_fail_no_ipython(self, fake_project_cli, mocker):
         assert result.exit_code
         error = (
             "Module 'IPython' not found. Make sure to install required project "
-            "dependencies by running the 'pip install -r src/requirements.txt' command first."
+            "dependencies by running the 'pip install -r requirements.txt' command first."
         )
         assert error in result.output
 
@@ -302,7 +302,7 @@ def test_happy_path(
                         "--outdir",
                         "../dist",
                     ],
-                    cwd=str(fake_repo_path / "src"),
+                    cwd=str(fake_repo_path),
                 ),
                 mocker.call(
                     [
@@ -351,10 +351,10 @@ def test_happy_path(
         )
         python_call_mock.assert_has_calls(
             [
-                mocker.call("pip", ["install", str(fake_repo_path / "src/[docs]")]),
+                mocker.call("pip", ["install", str(fake_repo_path / "[docs]")]),
                 mocker.call(
                     "pip",
-                    ["install", "-r", str(fake_repo_path / "src/requirements.txt")],
+                    ["install", "-r", str(fake_repo_path / "requirements.txt")],
                 ),
                 mocker.call("ipykernel", ["install", "--user", "--name=dummy_package"]),
             ]
@@ -395,9 +395,9 @@ def test_compile_from_requirements_file(
             "piptools",
             [
                 "compile",
-                str(fake_repo_path / "src" / "requirements.txt"),
+                str(fake_repo_path / "requirements.txt"),
                 "--output-file",
-                str(fake_repo_path / "src" / "requirements.lock"),
+                str(fake_repo_path / "requirements.lock"),
             ],
         )
 
@@ -410,10 +410,10 @@ def test_compile_from_input_and_to_output_file(
         fake_metadata,
     ):
         # File exists:
-        input_file = fake_repo_path / "src" / "dev-requirements.txt"
+        input_file = fake_repo_path / "dev-requirements.txt"
         with open(input_file, "a", encoding="utf-8") as file:
             file.write("")
-        output_file = fake_repo_path / "src" / "dev-requirements.lock"
+        output_file = fake_repo_path / "dev-requirements.lock"
 
         result = CliRunner().invoke(
             fake_project_cli,
@@ -444,7 +444,7 @@ def test_extra_args(
         extra_args,
         fake_metadata,
     ):
-        requirements_txt = fake_repo_path / "src" / "requirements.txt"
+        requirements_txt = fake_repo_path / "requirements.txt"
 
         result = CliRunner().invoke(
             fake_project_cli, ["build-reqs"] + extra_args, obj=fake_metadata
@@ -457,7 +457,7 @@ def test_extra_args(
             ["compile"]
             + extra_args
             + [str(requirements_txt)]
-            + ["--output-file", str(fake_repo_path / "src" / "requirements.lock")]
+            + ["--output-file", str(fake_repo_path / "requirements.lock")]
         )
         python_call_mock.assert_called_once_with("piptools", call_args)
 
@@ -466,7 +466,7 @@ def test_missing_requirements_txt(
         self, fake_project_cli, mocker, fake_metadata, os_name, fake_repo_path
     ):
         """Test error when input file requirements.txt doesn't exists."""
-        requirements_txt = fake_repo_path / "src" / "requirements.txt"
+        requirements_txt = fake_repo_path / "requirements.txt"
 
         mocker.patch("kedro.framework.cli.project.os").name = os_name
         mocker.patch.object(Path, "is_file", return_value=False)
diff --git a/tests/framework/cli/test_starters.py b/tests/framework/cli/test_starters.py
index 26fc6ac3e5..37c0512110 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 = 30
 
 
 @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()