diff --git a/kedro/templates/project/{{ cookiecutter.repo_name }}/README.md b/kedro/templates/project/{{ cookiecutter.repo_name }}/README.md
index 1fdca0fdd2..3b9d39c443 100644
--- a/kedro/templates/project/{{ cookiecutter.repo_name }}/README.md	
+++ b/kedro/templates/project/{{ 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 `requirements.txt` for `pip` installation and `environment.yml` for `conda` installation.
+Declare any dependencies in `pyproject.toml` for `pip` installation and `environment.yml` for `conda` installation.
 
 To install them, run:
 
 ```
-pip install -r requirements.txt
+pip install -e .
 ```
 
 ## How to run your Kedro pipeline
@@ -51,9 +51,9 @@ To generate or update the dependency requirements for your project:
 kedro build-reqs
 ```
 
-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`.
+This will `pip-compile` the contents of `pyproject.toml` 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 `requirements.txt` and re-run `kedro build-reqs`.
+After this, if you'd like to update your project requirements, please update `pyproject.toml` 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)
 
diff --git a/kedro/templates/project/{{ cookiecutter.repo_name }}/pyproject.toml b/kedro/templates/project/{{ cookiecutter.repo_name }}/pyproject.toml
index 7ae06368bd..871837b43b 100644
--- a/kedro/templates/project/{{ cookiecutter.repo_name }}/pyproject.toml	
+++ b/kedro/templates/project/{{ cookiecutter.repo_name }}/pyproject.toml	
@@ -1,3 +1,39 @@
+[build-system]
+requires = ["setuptools"]
+build-backend = "setuptools.build_meta"
+
+[project]
+name = "{{ cookiecutter.python_package }}"
+dependencies = [
+    "kedro~={{ cookiecutter.kedro_version }}",
+    "kedro-telemetry~=0.2.0",
+]
+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/kedro/templates/project/{{ cookiecutter.repo_name }}/requirements.txt b/kedro/templates/project/{{ cookiecutter.repo_name }}/requirements.txt
deleted file mode 100644
index 4a72e49b27..0000000000
--- a/kedro/templates/project/{{ cookiecutter.repo_name }}/requirements.txt	
+++ /dev/null
@@ -1,2 +0,0 @@
-kedro~={{ cookiecutter.kedro_version }}
-kedro-telemetry~=0.2.0
diff --git a/kedro/templates/project/{{ cookiecutter.repo_name }}/setup.py b/kedro/templates/project/{{ cookiecutter.repo_name }}/setup.py
deleted file mode 100644
index 8e62d661f8..0000000000
--- a/kedro/templates/project/{{ cookiecutter.repo_name }}/setup.py	
+++ /dev/null
@@ -1,39 +0,0 @@
-from setuptools import find_packages, setup
-
-entry_point = (
-    "{{ cookiecutter.repo_name }} = {{ cookiecutter.python_package }}.__main__:main"
-)
-
-
-# get the dependencies and installs
-with open("requirements.txt", encoding="utf-8") as f:
-    # Make sure we strip all comments and options (e.g "--extra-index-url")
-    # that arise from a modified pip.conf file that configure global options
-    # when running kedro build-reqs
-    requires = []
-    for line in f:
-        req = line.split("#", 1)[0].strip()
-        if req and not req.startswith("--"):
-            requires.append(req)
-
-setup(
-    name="{{ cookiecutter.python_package }}",
-    version="0.1",
-    packages=find_packages(exclude=["tests"]),
-    entry_points={"console_scripts": [entry_point]},
-    install_requires=requires,
-    extras_require={
-        "docs": [
-            "docutils<0.18.0",
-            "sphinx~=3.4.3",
-            "sphinx_rtd_theme==0.5.1",
-            "nbsphinx==0.8.1",
-            "nbstripout~=0.4",
-            "sphinx-autodoc-typehints==1.11.1",
-            "sphinx_copybutton==0.3.1",
-            "ipykernel>=5.3, <7.0",
-            "Jinja2<3.1.0",
-            "myst-parser~=0.17.2",
-        ]
-    },
-)
diff --git a/tests/framework/cli/test_starters.py b/tests/framework/cli/test_starters.py
index 26fc6ac3e5..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()