diff --git a/lib/pip.js b/lib/pip.js
index 29e21cfc..538ad55a 100644
--- a/lib/pip.js
+++ b/lib/pip.js
@@ -53,7 +53,7 @@ function mergeCommands(commands) {
  * @param {Object} options
  * @return {undefined}
  */
-function installRequirementsFile(
+function generateRequirementsFile(
   requirementsPath,
   targetFile,
   serverless,
@@ -61,7 +61,7 @@ function installRequirementsFile(
   options
 ) {
   if (options.usePipenv && fse.existsSync(path.join(servicePath, 'Pipfile'))) {
-    generateRequirementsFile(
+    filterRequirementsFile(
       path.join(servicePath, '.serverless/requirements.txt'),
       targetFile,
       options
@@ -70,7 +70,7 @@ function installRequirementsFile(
       `Parsed requirements.txt from Pipfile in ${targetFile}...`
     );
   } else {
-    generateRequirementsFile(requirementsPath, targetFile, options);
+    filterRequirementsFile(requirementsPath, targetFile, options);
     serverless.cli.log(
       `Generated requirements from ${requirementsPath} in ${targetFile}...`
     );
@@ -306,7 +306,6 @@ function dockerPathForWin(path) {
     return path;
   }
 }
-
 /** create a filtered requirements.txt without anything from noDeploy
  *  then remove all comments and empty lines, and sort the list which
  *  assist with matching the static cache.  The sorting will skip any
@@ -318,7 +317,7 @@ function dockerPathForWin(path) {
  * @param {string} target requirements where results are written
  * @param {Object} options
  */
-function generateRequirementsFile(source, target, options) {
+function filterRequirementsFile(source, target, options) {
   const noDeploy = new Set(options.noDeploy || []);
   const requirements = fse
     .readFileSync(source, { encoding: 'utf-8' })
@@ -413,11 +412,21 @@ function installRequirementsIfNeeded(
     }
   }
 
-  // First, generate the requirements file to our local .serverless folder
-  fse.ensureDirSync(path.join(servicePath, '.serverless'));
-  const slsReqsTxt = path.join(servicePath, '.serverless', 'requirements.txt');
+  let requirementsTxtDirectory;
+  // Copy our requirements to another path in .serverless (incase of individually packaged)
+  if (modulePath && modulePath !== '.') {
+    requirementsTxtDirectory = path.join(
+      servicePath,
+      '.serverless',
+      modulePath
+    );
+  } else {
+    requirementsTxtDirectory = path.join(servicePath, '.serverless');
+  }
+  fse.ensureDirSync(requirementsTxtDirectory);
+  const slsReqsTxt = path.join(requirementsTxtDirectory, 'requirements.txt');
 
-  installRequirementsFile(
+  generateRequirementsFile(
     fileName,
     slsReqsTxt,
     serverless,
@@ -433,28 +442,13 @@ function installRequirementsIfNeeded(
     return false;
   }
 
-  // Copy our requirements to another filename in .serverless (incase of individually packaged)
-  if (modulePath && modulePath != '.') {
-    fse.existsSync(path.join(servicePath, '.serverless', modulePath));
-    const destinationFile = path.join(
-      servicePath,
-      '.serverless',
-      modulePath,
-      'requirements.txt'
-    );
-    serverless.cli.log(
-      `Copying from ${slsReqsTxt} into ${destinationFile} ...`
-    );
-    fse.copySync(slsReqsTxt, destinationFile);
-  }
-
   // Then generate our MD5 Sum of this requirements file to determine where it should "go" to and/or pull cache from
   const reqChecksum = md5Path(slsReqsTxt);
 
   // Then figure out where this cache should be, if we're caching, if we're in a module, etc
   const workingReqsFolder = getRequirementsWorkingPath(
     reqChecksum,
-    servicePath,
+    requirementsTxtDirectory,
     options
   );
 
diff --git a/lib/shared.js b/lib/shared.js
index b3a1ffaa..fe48e0e0 100644
--- a/lib/shared.js
+++ b/lib/shared.js
@@ -57,7 +57,11 @@ function checkForAndDeleteMaxCacheVersions(options, serverless) {
  * @param  {Object} options
  * @return {string}
  */
-function getRequirementsWorkingPath(subfolder, servicePath, options) {
+function getRequirementsWorkingPath(
+  subfolder,
+  requirementsTxtDirectory,
+  options
+) {
   // If we want to use the static cache
   if (options && options.useStaticCache) {
     if (subfolder) {
@@ -69,7 +73,7 @@ function getRequirementsWorkingPath(subfolder, servicePath, options) {
   }
 
   // If we don't want to use the static cache, then fallback to the way things used to work
-  return path.join(servicePath, '.serverless', 'requirements');
+  return path.join(requirementsTxtDirectory, 'requirements');
 }
 
 /**
diff --git a/test.js b/test.js
index b310e672..64d15221 100644
--- a/test.js
+++ b/test.js
@@ -1008,35 +1008,79 @@ test('py3.6 can package flask with package individually option', t => {
   sls(['--individually=true', 'package']);
 
   const zipfiles_hello = listZipFiles('.serverless/hello.zip');
+  t.false(
+    zipfiles_hello.includes(`fn2${sep}__init__.py`),
+    'fn2 is NOT packaged in function hello'
+  );
   t.true(
     zipfiles_hello.includes('handler.py'),
     'handler.py is packaged in function hello'
   );
+  t.false(
+    zipfiles_hello.includes(`dataclasses.py`),
+    'dataclasses is NOT packaged in function hello'
+  );
   t.true(
     zipfiles_hello.includes(`flask${sep}__init__.py`),
     'flask is packaged in function hello'
   );
 
   const zipfiles_hello2 = listZipFiles('.serverless/hello2.zip');
+  t.false(
+    zipfiles_hello2.includes(`fn2${sep}__init__.py`),
+    'fn2 is NOT packaged in function hello2'
+  );
   t.true(
     zipfiles_hello2.includes('handler.py'),
     'handler.py is packaged in function hello2'
   );
+  t.false(
+    zipfiles_hello2.includes(`dataclasses.py`),
+    'dataclasses is NOT packaged in function hello2'
+  );
   t.true(
     zipfiles_hello2.includes(`flask${sep}__init__.py`),
     'flask is packaged in function hello2'
   );
 
   const zipfiles_hello3 = listZipFiles('.serverless/hello3.zip');
+  t.false(
+    zipfiles_hello3.includes(`fn2${sep}__init__.py`),
+    'fn2 is NOT packaged in function hello3'
+  );
   t.true(
     zipfiles_hello3.includes('handler.py'),
-    'handler.py is packaged in function hello2'
+    'handler.py is packaged in function hello3'
+  );
+  t.false(
+    zipfiles_hello3.includes(`dataclasses.py`),
+    'dataclasses is NOT packaged in function hello3'
   );
   t.false(
     zipfiles_hello3.includes(`flask${sep}__init__.py`),
     'flask is NOT packaged in function hello3'
   );
 
+  const zipfiles_hello4 = listZipFiles(
+    '.serverless/fn2-sls-py-req-test-dev-hello4.zip'
+  );
+  t.false(
+    zipfiles_hello4.includes(`fn2${sep}__init__.py`),
+    'fn2 is NOT packaged in function hello4'
+  );
+  t.true(
+    zipfiles_hello4.includes('fn2_handler.py'),
+    'fn2_handler is packaged in the zip-root in function hello4'
+  );
+  t.true(
+    zipfiles_hello4.includes(`dataclasses.py`),
+    'dataclasses is packaged in function hello4'
+  );
+  t.false(
+    zipfiles_hello4.includes(`flask${sep}__init__.py`),
+    'flask is NOT packaged in function hello4'
+  );
+
   t.end();
 });
 
@@ -1060,6 +1104,10 @@ test('py3.6 can package flask with package individually & slim option', t => {
     zipfiles_hello.includes(`flask${sep}__init__.py`),
     'flask is packaged in function hello'
   );
+  t.false(
+    zipfiles_hello.includes(`dataclasses.py`),
+    'dataclasses is NOT packaged in function hello'
+  );
 
   const zipfiles_hello2 = listZipFiles('.serverless/hello2.zip');
   t.true(
@@ -1075,6 +1123,10 @@ test('py3.6 can package flask with package individually & slim option', t => {
     zipfiles_hello2.includes(`flask${sep}__init__.py`),
     'flask is packaged in function hello2'
   );
+  t.false(
+    zipfiles_hello2.includes(`dataclasses.py`),
+    'dataclasses is NOT packaged in function hello2'
+  );
 
   const zipfiles_hello3 = listZipFiles('.serverless/hello3.zip');
   t.true(
@@ -1091,6 +1143,27 @@ test('py3.6 can package flask with package individually & slim option', t => {
     'flask is NOT packaged in function hello3'
   );
 
+  const zipfiles_hello4 = listZipFiles(
+    '.serverless/fn2-sls-py-req-test-dev-hello4.zip'
+  );
+  t.true(
+    zipfiles_hello4.includes('fn2_handler.py'),
+    'fn2_handler is packaged in the zip-root in function hello4'
+  );
+  t.true(
+    zipfiles_hello4.includes(`dataclasses.py`),
+    'dataclasses is packaged in function hello4'
+  );
+  t.false(
+    zipfiles_hello4.includes(`flask${sep}__init__.py`),
+    'flask is NOT packaged in function hello4'
+  );
+  t.deepEqual(
+    zipfiles_hello4.filter(filename => filename.endsWith('.pyc')),
+    [],
+    'no pyc files packaged in function hello4'
+  );
+
   t.end();
 });
 
@@ -1109,6 +1182,10 @@ test('py2.7 can package flask with package individually option', t => {
     zipfiles_hello.includes(`flask${sep}__init__.py`),
     'flask is packaged in function hello'
   );
+  t.false(
+    zipfiles_hello.includes(`dataclasses.py`),
+    'dataclasses is NOT packaged in function hello'
+  );
 
   const zipfiles_hello2 = listZipFiles('.serverless/hello2.zip');
   t.true(
@@ -1119,6 +1196,10 @@ test('py2.7 can package flask with package individually option', t => {
     zipfiles_hello2.includes(`flask${sep}__init__.py`),
     'flask is packaged in function hello2'
   );
+  t.false(
+    zipfiles_hello2.includes(`dataclasses.py`),
+    'dataclasses is NOT packaged in function hello2'
+  );
 
   const zipfiles_hello3 = listZipFiles('.serverless/hello3.zip');
   t.true(
@@ -1129,6 +1210,26 @@ test('py2.7 can package flask with package individually option', t => {
     zipfiles_hello3.includes(`flask${sep}__init__.py`),
     'flask is NOT packaged in function hello3'
   );
+  t.false(
+    zipfiles_hello3.includes(`dataclasses.py`),
+    'dataclasses is NOT packaged in function hello3'
+  );
+
+  const zipfiles_hello4 = listZipFiles(
+    '.serverless/fn2-sls-py-req-test-dev-hello4.zip'
+  );
+  t.true(
+    zipfiles_hello4.includes('fn2_handler.py'),
+    'fn2_handler is packaged in the zip-root in function hello4'
+  );
+  t.true(
+    zipfiles_hello4.includes(`dataclasses.py`),
+    'dataclasses is packaged in function hello4'
+  );
+  t.false(
+    zipfiles_hello4.includes(`flask${sep}__init__.py`),
+    'flask is NOT packaged in function hello4'
+  );
 
   t.end();
 });
@@ -1153,6 +1254,10 @@ test('py2.7 can package flask with package individually & slim option', t => {
     zipfiles_hello.includes(`flask${sep}__init__.py`),
     'flask is packaged in function hello'
   );
+  t.false(
+    zipfiles_hello.includes(`dataclasses.py`),
+    'dataclasses is NOT packaged in function hello'
+  );
 
   const zipfiles_hello2 = listZipFiles('.serverless/hello2.zip');
   t.true(
@@ -1168,6 +1273,10 @@ test('py2.7 can package flask with package individually & slim option', t => {
     zipfiles_hello2.includes(`flask${sep}__init__.py`),
     'flask is packaged in function hello2'
   );
+  t.false(
+    zipfiles_hello2.includes(`dataclasses.py`),
+    'dataclasses is NOT packaged in function hello2'
+  );
 
   const zipfiles_hello3 = listZipFiles('.serverless/hello3.zip');
   t.true(
@@ -1183,6 +1292,26 @@ test('py2.7 can package flask with package individually & slim option', t => {
     zipfiles_hello3.includes(`flask${sep}__init__.py`),
     'flask is NOT packaged in function hello3'
   );
+  t.false(
+    zipfiles_hello3.includes(`dataclasses.py`),
+    'dataclasses is NOT packaged in function hello3'
+  );
+
+  const zipfiles_hello4 = listZipFiles(
+    '.serverless/fn2-sls-py-req-test-dev-hello4.zip'
+  );
+  t.true(
+    zipfiles_hello4.includes('fn2_handler.py'),
+    'fn2_handler is packaged in the zip-root in function hello4'
+  );
+  t.true(
+    zipfiles_hello4.includes(`dataclasses.py`),
+    'dataclasses is packaged in function hello4'
+  );
+  t.false(
+    zipfiles_hello4.includes(`flask${sep}__init__.py`),
+    'flask is NOT packaged in function hello4'
+  );
 
   t.end();
 });
@@ -1255,6 +1384,10 @@ test('py3.6 can package lambda-decorators using vendor and invidiually option',
     zipfiles_hello.includes(`lambda_decorators.py`),
     'lambda_decorators.py is packaged in function hello'
   );
+  t.false(
+    zipfiles_hello.includes(`dataclasses.py`),
+    'dataclasses is NOT packaged in function hello'
+  );
 
   const zipfiles_hello2 = listZipFiles('.serverless/hello2.zip');
   t.true(
@@ -1269,6 +1402,10 @@ test('py3.6 can package lambda-decorators using vendor and invidiually option',
     zipfiles_hello2.includes(`lambda_decorators.py`),
     'lambda_decorators.py is packaged in function hello2'
   );
+  t.false(
+    zipfiles_hello2.includes(`dataclasses.py`),
+    'dataclasses is NOT packaged in function hello2'
+  );
 
   const zipfiles_hello3 = listZipFiles('.serverless/hello3.zip');
   t.true(
@@ -1283,7 +1420,26 @@ test('py3.6 can package lambda-decorators using vendor and invidiually option',
     zipfiles_hello3.includes(`lambda_decorators.py`),
     'lambda_decorators.py is NOT packaged in function hello3'
   );
+  t.false(
+    zipfiles_hello3.includes(`dataclasses.py`),
+    'dataclasses is NOT packaged in function hello3'
+  );
 
+  const zipfiles_hello4 = listZipFiles(
+    '.serverless/fn2-sls-py-req-test-dev-hello4.zip'
+  );
+  t.true(
+    zipfiles_hello4.includes('fn2_handler.py'),
+    'fn2_handler is packaged in the zip-root in function hello4'
+  );
+  t.true(
+    zipfiles_hello4.includes(`dataclasses.py`),
+    'dataclasses is packaged in function hello4'
+  );
+  t.false(
+    zipfiles_hello4.includes(`flask${sep}__init__.py`),
+    'flask is NOT packaged in function hello4'
+  );
   t.end();
 });
 
diff --git a/tests/base/fn2/__init__.py b/tests/base/fn2/__init__.py
new file mode 100644
index 00000000..e69de29b
diff --git a/tests/base/fn2/fn2_handler.py b/tests/base/fn2/fn2_handler.py
new file mode 100644
index 00000000..e69de29b
diff --git a/tests/base/fn2/requirements.txt b/tests/base/fn2/requirements.txt
new file mode 100644
index 00000000..eea18113
--- /dev/null
+++ b/tests/base/fn2/requirements.txt
@@ -0,0 +1 @@
+dataclasses
\ No newline at end of file
diff --git a/tests/base/serverless.yml b/tests/base/serverless.yml
index a62dbc01..1684ab2f 100644
--- a/tests/base/serverless.yml
+++ b/tests/base/serverless.yml
@@ -32,7 +32,7 @@ package:
   individually: ${opt:individually, self:custom.defaults.individually}
   exclude:
     - '**/*'
-  include: 
+  include:
     - 'handler.py'
 
 functions:
@@ -43,3 +43,11 @@ functions:
   hello3:
     handler: handler.hello
     runtime: nodejs6.10
+  hello4:
+    handler: fn2_handler.hello
+    module: fn2
+    package:
+      include:
+        - 'fn2/**'
+
+
diff --git a/tests/individually/module1/handler1.py b/tests/individually/module1/handler1.py
index 970b0c01..369835cd 100644
--- a/tests/individually/module1/handler1.py
+++ b/tests/individually/module1/handler1.py
@@ -1,6 +1,9 @@
 import boto3
 
+
 def hello(event, context):
-    return {
-        'status': 200,
-    }
+    return {"status": 200}
+
+
+def hello2(event, context):
+    return {"status": 200}