diff --git a/src/DependencyManagement/DependencyManager.cs b/src/DependencyManagement/DependencyManager.cs
index cfd9cc64..d2e95fae 100644
--- a/src/DependencyManagement/DependencyManager.cs
+++ b/src/DependencyManagement/DependencyManager.cs
@@ -45,6 +45,9 @@ internal class DependencyManager
         // Central repository for acquiring PowerShell modules.
         private const string Repository = "PSGallery";
 
+        // AzureFunctions folder name.
+        private const string AzureFunctionsFolderName = "AzureFunctions";
+
         // Managed Dependencies folder name.
         private const string ManagedDependenciesFolderName = "ManagedDependencies";
 
@@ -305,9 +308,9 @@ private void ValidateModuleName(string name)
         /// <summary>
         /// Gets the Managed Dependencies folder path.
         /// If we are running in Azure, the path is HOME\data\ManagedDependencies.
-        /// Otherwise, the path is functionAppRoot\ManagedDependencies.
+        /// Otherwise, the path is LocalApplicationData\AzureFunctions\FunctionAppName\ManagedDependencies.
         /// </summary>
-        private string GetManagedDependenciesPath(string functionAppRoot)
+        private string GetManagedDependenciesPath(string functionAppRootPath)
         {
             string managedDependenciesFolderPath = null;
 
@@ -325,8 +328,10 @@ private string GetManagedDependenciesPath(string functionAppRoot)
             }
             else
             {
-                // Otherwise, the ManagedDependencies folder is created under the function app root.
-                managedDependenciesFolderPath = Path.Join(functionAppRoot, ManagedDependenciesFolderName);
+                // Otherwise, the ManagedDependencies folder is created under LocalApplicationData\AzureFunctions\FunctionAppName\ManagedDependencies.
+                string functionAppName = Path.GetFileName(functionAppRootPath);
+                string appDataFolder = Environment.GetFolderPath(Environment.SpecialFolder.LocalApplicationData, Environment.SpecialFolderOption.DoNotVerify);
+                managedDependenciesFolderPath = Path.Combine(appDataFolder, AzureFunctionsFolderName, functionAppName, ManagedDependenciesFolderName);
             }
 
             return managedDependenciesFolderPath;
diff --git a/test/Unit/DependencyManagement/DependencyManagementTests.cs b/test/Unit/DependencyManagement/DependencyManagementTests.cs
index ac4161b2..83c3f6f3 100644
--- a/test/Unit/DependencyManagement/DependencyManagementTests.cs
+++ b/test/Unit/DependencyManagement/DependencyManagementTests.cs
@@ -16,6 +16,7 @@ public class DependencyManagementTests
         private readonly string _dependencyManagementDirectory;
         private readonly string _functionId;
         private const string ManagedDependenciesFolderName = "ManagedDependencies";
+        private const string AzureFunctionsFolderName = "AzureFunctions";
 
         public DependencyManagementTests()
         {
@@ -42,6 +43,14 @@ private FunctionLoadRequest GetFuncLoadRequest(string functionAppRoot, bool mana
             return functionLoadRequest;
         }
 
+        private string GetManagedDependenciesPath(string functionAppRootPath)
+        {
+            string functionAppName = Path.GetFileName(functionAppRootPath);
+            string appDataFolder = Environment.GetFolderPath(Environment.SpecialFolder.LocalApplicationData, Environment.SpecialFolderOption.DoNotVerify);
+            string managedDependenciesFolderPath = Path.Combine(appDataFolder, AzureFunctionsFolderName, functionAppName, ManagedDependenciesFolderName);
+            return managedDependenciesFolderPath;
+        }
+
         private void TestCaseCleanup()
         {
             // We run a test case clean up to reset DependencyManager.Dependencies and DependencyManager.DependenciesPath
@@ -66,10 +75,10 @@ public void TestManagedDependencyBasicRequirements()
             {
                 // Test case setup.
                 var requirementsDirectoryName = "BasicRequirements";
-                var functionFolderPath = Path.Combine(_dependencyManagementDirectory, requirementsDirectoryName,
-                    "FunctionDirectory");
-                var managedDependenciesFolderPath = Path.Combine(_dependencyManagementDirectory,
-                    requirementsDirectoryName, ManagedDependenciesFolderName);
+                var functionFolderPath = Path.Combine(_dependencyManagementDirectory, requirementsDirectoryName, "FunctionDirectory");
+                var functionAppRoot = Path.Combine(_dependencyManagementDirectory, requirementsDirectoryName);
+                var managedDependenciesFolderPath = GetManagedDependenciesPath(functionAppRoot);
+
                 var functionLoadRequest = GetFuncLoadRequest(functionFolderPath, true);
 
                 // Create DependencyManager and process the requirements.psd1 file at the function app root.
@@ -97,10 +106,9 @@ public void TestManagedDependencyEmptyHashtableRequirement()
             {
                 // Test case setup.
                 var requirementsDirectoryName = "EmptyHashtableRequirement";
-                var functionFolderPath = Path.Combine(_dependencyManagementDirectory, requirementsDirectoryName,
-                    "FunctionDirectory");
-                var managedDependenciesFolderPath = Path.Combine(_dependencyManagementDirectory,
-                    requirementsDirectoryName, ManagedDependenciesFolderName);
+                var functionFolderPath = Path.Combine(_dependencyManagementDirectory, requirementsDirectoryName,"FunctionDirectory");
+                var functionAppRoot = Path.Combine(_dependencyManagementDirectory, requirementsDirectoryName);
+                var managedDependenciesFolderPath = GetManagedDependenciesPath(functionAppRoot);
                 var functionLoadRequest = GetFuncLoadRequest(functionFolderPath, true);
 
                 // Create DependencyManager and process the requirements.psd1 file at the function app root.