diff --git a/RELEASE.md b/RELEASE.md
index bd338addd5..a80940b776 100644
--- a/RELEASE.md
+++ b/RELEASE.md
@@ -19,6 +19,8 @@
 
 ## Bug fixes and other changes
 * Updated `kedro pipeline create` and `kedro catalog create` to use new `/conf` file structure.
+* Converted `setup.py` in default template to `pyproject.toml` and moved flake8 configuration
+  to dedicated file `.flake8`.
 
 ## Documentation changes
 * Revised the `data` section to restructure beginner and advanced pages about the Data Catalog and datasets.
diff --git a/docs/source/conf.py b/docs/source/conf.py
index 4519143968..e80f9b2b29 100644
--- a/docs/source/conf.py
+++ b/docs/source/conf.py
@@ -227,7 +227,9 @@
     "https://opensource.org/license/apache2-0-php/",
     "https://docs.github.com/en/rest/overview/other-authentication-methods#via-username-and-password",
     "https://docs.snowflake.com/en/developer-guide/snowpark/reference/python/api/snowflake.snowpark.DataFrameWriter.saveAsTable.html",
-    "https://www.educative.io/blog/advanced-yaml-syntax-cheatsheet#anchors"
+    "https://www.educative.io/blog/advanced-yaml-syntax-cheatsheet#anchors",
+    # temporarily, until the file actually exists in `main`
+    "https://github.com/kedro-org/kedro/blob/main/kedro/templates/project/%7B%7B%20cookiecutter.repo_name%20%7D%7D/.flake8",
 ]
 
 # retry before render a link broken (fix for "too many requests")
diff --git a/docs/source/deployment/airflow_astronomer.md b/docs/source/deployment/airflow_astronomer.md
index 307e9ab903..b21408156b 100644
--- a/docs/source/deployment/airflow_astronomer.md
+++ b/docs/source/deployment/airflow_astronomer.md
@@ -74,7 +74,7 @@ To follow this tutorial, ensure you have the following:
     ├── plugins
     ├── pyproject.toml
     ├── requirements.txt
-    ├── setup.cfg
+    ├── .flake8
     └── src
     ```
 
diff --git a/docs/source/development/linting.md b/docs/source/development/linting.md
index d795086b51..a8bdbc0c44 100644
--- a/docs/source/development/linting.md
+++ b/docs/source/development/linting.md
@@ -60,7 +60,7 @@ It is a good practice to [split your line when it is too long](https://beta.ruff
 
 #### Configure `flake8`
 
-Store your `flake8` configuration in a file named `setup.cfg` within your project root. The Kedro starters use the [following configuration](https://github.com/kedro-org/kedro-starters/blob/main/pandas-iris/%7B%7B%20cookiecutter.repo_name%20%7D%7D/setup.cfg):
+Store your `flake8` configuration in a file named `.flake8` within your project root. The Kedro default project template use the [following configuration](https://github.com/kedro-org/kedro/blob/main/kedro/templates/project/%7B%7B%20cookiecutter.repo_name%20%7D%7D/.flake8):
 
 ```text
 [flake8]
diff --git a/docs/source/get_started/kedro_concepts.md b/docs/source/get_started/kedro_concepts.md
index 4a6d771da0..67f9bf84a9 100644
--- a/docs/source/get_started/kedro_concepts.md
+++ b/docs/source/get_started/kedro_concepts.md
@@ -72,7 +72,7 @@ project-dir         # Parent directory of the template
 ├── notebooks       # Project-related Jupyter notebooks (can be used for experimental code before moving the code to src)
 ├── pyproject.toml  # Identifies the project root and contains configuration information
 ├── README.md       # Project README
-├── setup.cfg       # Configuration options for `pytest` when doing `kedro test` and for the `isort` utility when doing `kedro lint`
+├── .flake8         # Configuration options for `flake8` (linting)
 └── src             # Project source code
 ```
 
diff --git a/docs/source/kedro_project_setup/starters.md b/docs/source/kedro_project_setup/starters.md
index 4ad60cb0c2..305fe1de00 100644
--- a/docs/source/kedro_project_setup/starters.md
+++ b/docs/source/kedro_project_setup/starters.md
@@ -155,7 +155,7 @@ 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 `black`
+├── .flake8                      # Configuration options for `flake8` (linting)
 └── src                          # Project source code
     └── {{ cookiecutter.python_package }}
        ├── __init.py__
@@ -164,7 +164,7 @@ Here is the layout of the project as a Cookiecutter template:
        ├── __main__.py
        └── settings.py
     ├── requirements.txt
-    ├── setup.py
+    ├── pyproject.toml
     └── tests
 ```
 
diff --git a/features/steps/test_starter/{{ cookiecutter.repo_name }}/.flake8 b/features/steps/test_starter/{{ cookiecutter.repo_name }}/.flake8
new file mode 100644
index 0000000000..8dd399ab55
--- /dev/null
+++ b/features/steps/test_starter/{{ cookiecutter.repo_name }}/.flake8	
@@ -0,0 +1,3 @@
+[flake8]
+max-line-length = 88
+extend-ignore = E203
diff --git a/features/steps/test_starter/{{ cookiecutter.repo_name }}/README.md b/features/steps/test_starter/{{ cookiecutter.repo_name }}/README.md
index 8041d41dd9..fd206a315d 100644
--- a/features/steps/test_starter/{{ cookiecutter.repo_name }}/README.md	
+++ b/features/steps/test_starter/{{ cookiecutter.repo_name }}/README.md	
@@ -17,7 +17,7 @@ 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 `src/requirements.txt` for `pip` installation.
 
 To install them, run:
 
diff --git a/features/steps/test_starter/{{ cookiecutter.repo_name }}/setup.cfg b/features/steps/test_starter/{{ cookiecutter.repo_name }}/setup.cfg
deleted file mode 100644
index 3edf923e16..0000000000
--- a/features/steps/test_starter/{{ cookiecutter.repo_name }}/setup.cfg	
+++ /dev/null
@@ -1,5 +0,0 @@
-; Flake8 will be moved in `pyproject.toml` once the library
-; starts supporting such config source
-[flake8]
-max-line-length = 88
-extend-ignore = E203
diff --git a/features/steps/test_starter/{{ cookiecutter.repo_name }}/src/pyproject.toml b/features/steps/test_starter/{{ cookiecutter.repo_name }}/src/pyproject.toml
new file mode 100644
index 0000000000..ea581e7028
--- /dev/null
+++ b/features/steps/test_starter/{{ cookiecutter.repo_name }}/src/pyproject.toml	
@@ -0,0 +1,31 @@
+[build-system]
+requires = ["setuptools"]
+build-backend = "setuptools.build_meta"
+
+[project]
+name = "{{ cookiecutter.python_package }}"
+version = "0.1"
+dynamic = ["dependencies"]
+
+[tool.setuptools.packages.find]
+exclude = ["tests"]
+
+[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]
+dependencies = {file = "requirements.txt"}
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/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 }}/src/pyproject.toml b/kedro/templates/project/{{ cookiecutter.repo_name }}/src/pyproject.toml
new file mode 100644
index 0000000000..ea581e7028
--- /dev/null
+++ b/kedro/templates/project/{{ cookiecutter.repo_name }}/src/pyproject.toml	
@@ -0,0 +1,31 @@
+[build-system]
+requires = ["setuptools"]
+build-backend = "setuptools.build_meta"
+
+[project]
+name = "{{ cookiecutter.python_package }}"
+version = "0.1"
+dynamic = ["dependencies"]
+
+[tool.setuptools.packages.find]
+exclude = ["tests"]
+
+[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]
+dependencies = {file = "requirements.txt"}
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/tests/framework/cli/micropkg/test_micropkg_requirements.py b/tests/framework/cli/micropkg/test_micropkg_requirements.py
index b0070a1bee..4b424073b7 100644
--- a/tests/framework/cli/micropkg/test_micropkg_requirements.py
+++ b/tests/framework/cli/micropkg/test_micropkg_requirements.py
@@ -249,8 +249,8 @@ def test_empty_pipeline_requirements_txt(
     def test_complex_requirements(
         self, requirement, fake_project_cli, fake_metadata, fake_package_path
     ):
-        """Options that are valid in requirements.txt but cannot be packaged using
-        setup.py."""
+        """Options that are valid in requirements.txt but cannot be packaged in
+        pyproject.toml."""
         self.call_pipeline_create(fake_project_cli, fake_metadata)
         pipeline_requirements_txt = (
             fake_package_path / "pipelines" / PIPELINE_NAME / "requirements.txt"