diff --git a/bin/boxfile b/bin/boxfile
index 2d5427c..0f5c68b 100755
--- a/bin/boxfile
+++ b/bin/boxfile
@@ -5,7 +5,7 @@
 cat <<-END
 run.config:
   cache_dirs:
-    - src
+    - .nanobox/pip
 END
 if [[ $(grep -c build_triggers /opt/nanobox/hooks/lib/boxfile.rb) -gt 1 ]]; then
 	cat <<-END
diff --git a/bin/build b/bin/build
index 383012a..47a6fef 100755
--- a/bin/build
+++ b/bin/build
@@ -14,6 +14,9 @@ nos_init "$@"
 # install python interpreter and pip
 install_runtime_packages
 
+# set pip env
+set_pip_env
+
 # setup python environment
 setup_python_env
 
diff --git a/lib/python.sh b/lib/python.sh
index 469ce0a..34599b7 100644
--- a/lib/python.sh
+++ b/lib/python.sh
@@ -124,7 +124,15 @@ pip_install_cmd() {
 
 # the default pip install cmd when a user-specified cmd is not present
 default_pip_install() {
-  echo "pip install -I -r requirements.txt"
+  echo "\
+    pip install \
+      -I \
+      -r requirements.txt \
+      --disable-pip-version-check \
+      --no-cache-dir \
+      --target=$(nos_code_dir)/.nanobox/pip/src \
+      --upgrade \
+      --install-option='--install-scripts=$(nos_code_dir)/.nanobox/pip/bin'"
 }
 
 # Install dependencies via pip from requirements.txt
@@ -136,3 +144,21 @@ pip_install() {
     cd - >/dev/null
   fi
 }
+
+# Generate the payload to render the pip env profile.d template
+pip_env_payload() {
+  cat <<-END
+{
+  "code_dir": "$(nos_code_dir)"
+}
+END
+}
+
+# Since we install pip modules into a custom cache_dir, we need
+# to setup the environment (with env vars) for the python app to work
+set_pip_env() {
+  nos_template \
+    "profile.d/pip.sh" \
+    "$(nos_etc_dir)/profile.d/pip.sh" \
+    "$(pip_env_payload)"
+}
diff --git a/templates/profile.d/pip.sh b/templates/profile.d/pip.sh
new file mode 100755
index 0000000..38abde5
--- /dev/null
+++ b/templates/profile.d/pip.sh
@@ -0,0 +1,8 @@
+#!/bin/bash
+
+# Nanobox stashes the pip module src and bin dirs inside of a cache_dir
+# at {{code_dir}}/.nanobox/pip. We need to set PATH to include the bin dir
+# and PYTHONPATH to include the src dir
+
+export PATH={{code_dir}}/.nanobox/pip/bin:$PATH
+export PYTHONPATH={{code_dir}}/.nanobox/pip/src:$PYTHONPATH
diff --git a/test/apps/simple-python/requirements.txt b/test/apps/simple-python/requirements.txt
index bd4036f..bb7162c 100644
--- a/test/apps/simple-python/requirements.txt
+++ b/test/apps/simple-python/requirements.txt
@@ -1,3 +1,3 @@
--e git://github.com/webpy/webpy.git#egg=web.py
+web.py
 gunicorn
-Pillow
\ No newline at end of file
+Pillow
diff --git a/test/tests/integration/simple-python.bats b/test/tests/integration/simple-python.bats
index f9b1f14..14383b4 100644
--- a/test/tests/integration/simple-python.bats
+++ b/test/tests/integration/simple-python.bats
@@ -82,8 +82,11 @@ setup() {
   # cd into the app code_dir
   cd /tmp/code
 
+  # source the profile.d/pip.sh env
+  source /data/etc/profile.d/pip.sh
+
   # start the server in the background
-  /data/bin/gunicorn -b 0.0.0.0:8080 app:wsgiapp &
+  /tmp/code/.nanobox/pip/bin/gunicorn -b 0.0.0.0:8080 app:wsgiapp &
 
   # grab the pid
   pid=$!
diff --git a/test/util/env.sh b/test/util/env.sh
index a599d3f..3f0e847 100644
--- a/test/util/env.sh
+++ b/test/util/env.sh
@@ -1,11 +1,14 @@
 
 directories=(
   "/tmp/code"
+  "/tmp/code/.nanobox"
+  "/tmp/code/.nanobox/pip"
   "/tmp/app"
   "/tmp/cache"
   "/data"
   "/data/etc"
   "/data/etc/env.d"
+  "/data/etc/profile.d"
 )
 
 prepare_environment() {