diff --git a/python_modules/libraries/dagster-dbt/dagster_dbt/cli/app.py b/python_modules/libraries/dagster-dbt/dagster_dbt/cli/app.py
index 0f8a349418e5a..5546e01abb83c 100644
--- a/python_modules/libraries/dagster-dbt/dagster_dbt/cli/app.py
+++ b/python_modules/libraries/dagster-dbt/dagster_dbt/cli/app.py
@@ -73,6 +73,7 @@ def copy_scaffold(
     project_name: str,
     dagster_project_dir: Path,
     dbt_project_dir: Path,
+    use_dbt_project_package_data_dir: bool,
 ) -> None:
     shutil.copytree(src=STARTER_PROJECT_PATH, dst=dagster_project_dir)
     dagster_project_dir.joinpath("__init__.py").unlink()
@@ -89,6 +90,9 @@ def copy_scaffold(
         for target in profile["outputs"].values()
     ]
 
+    if use_dbt_project_package_data_dir:
+        dbt_project_dir = dagster_project_dir.joinpath("dbt-project")
+
     dbt_project_dir_relative_path = Path(
         os.path.relpath(
             dbt_project_dir,
@@ -118,6 +122,7 @@ def copy_scaffold(
                 dbt_assets_name=f"{dbt_project_name}_dbt_assets",
                 dbt_adapter_packages=dbt_adapter_packages,
                 project_name=project_name,
+                use_dbt_project_package_data_dir=use_dbt_project_package_data_dir,
             ).dump(destination_path)
 
             path.unlink()
@@ -154,6 +159,15 @@ def project_scaffold_command(
             resolve_path=True,
         ),
     ] = Path.cwd(),
+    use_dbt_project_package_data_dir: Annotated[
+        bool,
+        typer.Option(
+            default=...,
+            help="Controls whether the dbt project package data directory is used.",
+            is_flag=True,
+            hidden=True,
+        ),
+    ] = False,
 ) -> None:
     """This command will initialize a new Dagster project and create directories and files that
     load assets from an existing dbt project.
@@ -173,6 +187,7 @@ def project_scaffold_command(
         project_name=project_name,
         dagster_project_dir=dagster_project_dir,
         dbt_project_dir=dbt_project_dir,
+        use_dbt_project_package_data_dir=use_dbt_project_package_data_dir,
     )
 
     console.print(
diff --git a/python_modules/libraries/dagster-dbt/dagster_dbt/include/scaffold/definitions.py.jinja b/python_modules/libraries/dagster-dbt/dagster_dbt/include/scaffold/definitions.py.jinja
index a02bba7e1fdeb..beffbf4a8105d 100644
--- a/python_modules/libraries/dagster-dbt/dagster_dbt/include/scaffold/definitions.py.jinja
+++ b/python_modules/libraries/dagster-dbt/dagster_dbt/include/scaffold/definitions.py.jinja
@@ -4,6 +4,10 @@ from pathlib import Path
 from dagster import Definitions, OpExecutionContext
 from dagster_dbt import DbtCliResource, build_schedule_from_dbt_selection, dbt_assets
 
+{% if use_dbt_project_package_data_dir -%}
+# We expect the dbt project to be installed as package data.
+# For details, see https://docs.python.org/3/distutils/setupscript.html#installing-package-data.
+{%- endif %}
 dbt_project_dir = Path(__file__).parent.joinpath({{ dbt_project_dir_relative_path_parts | join(', ')}})
 dbt = DbtCliResource(project_dir=os.fspath(dbt_project_dir))
 
diff --git a/python_modules/libraries/dagster-dbt/dagster_dbt/include/setup.py.jinja b/python_modules/libraries/dagster-dbt/dagster_dbt/include/setup.py.jinja
index 53064fe2574a0..4956224aeda95 100644
--- a/python_modules/libraries/dagster-dbt/dagster_dbt/include/setup.py.jinja
+++ b/python_modules/libraries/dagster-dbt/dagster_dbt/include/setup.py.jinja
@@ -4,6 +4,13 @@ setup(
     name="{{ project_name }}",
     version="0.0.1",
     packages=find_packages(),
+    {% if use_dbt_project_package_data_dir -%}
+    package_data={
+        "{{ project_name }}": [
+            "dbt-project/**/*",
+        ],
+    },
+    {%- endif %}
     install_requires=[
         "dagster",
         "dagster-cloud",
diff --git a/python_modules/libraries/dagster-dbt/dagster_dbt_tests/cli/test_app.py b/python_modules/libraries/dagster-dbt/dagster_dbt_tests/cli/test_app.py
index f0b3185c69dcc..217cac178161e 100644
--- a/python_modules/libraries/dagster-dbt/dagster_dbt_tests/cli/test_app.py
+++ b/python_modules/libraries/dagster-dbt/dagster_dbt_tests/cli/test_app.py
@@ -33,12 +33,16 @@ def dbt_project_dir_fixture(tmp_path: Path) -> Path:
     return dbt_project_dir
 
 
+@pytest.mark.parametrize("use_dbt_project_package_data_dir", [True, False])
 def test_project_scaffold_command_with_precompiled_manifest(
-    monkeypatch: pytest.MonkeyPatch, tmp_path: Path, dbt_project_dir: Path
+    monkeypatch: pytest.MonkeyPatch,
+    tmp_path: Path,
+    dbt_project_dir: Path,
+    use_dbt_project_package_data_dir: bool,
 ) -> None:
     monkeypatch.chdir(tmp_path)
 
-    project_name = "test_dagster_scaffold"
+    project_name = f"test_dagster_scaffold_{use_dbt_project_package_data_dir}"
     dagster_project_dir = tmp_path.joinpath(project_name)
 
     result = runner.invoke(
@@ -50,6 +54,7 @@ def test_project_scaffold_command_with_precompiled_manifest(
             project_name,
             "--dbt-project-dir",
             os.fspath(dbt_project_dir),
+            *(["--use-dbt-project-package-data-dir"] if use_dbt_project_package_data_dir else []),
         ],
     )
 
@@ -61,6 +66,13 @@ def test_project_scaffold_command_with_precompiled_manifest(
     assert not any(path.suffix == ".jinja" for path in dagster_project_dir.glob("**/*"))
     assert "dbt-duckdb" in dagster_project_dir.joinpath("setup.py").read_text()
 
+    if use_dbt_project_package_data_dir:
+        dbt_project_dir = dagster_project_dir.joinpath("dbt-project")
+        shutil.copytree(
+            src=test_dagster_metadata_dbt_project_path,
+            dst=dbt_project_dir,
+        )
+
     subprocess.run(["dbt", "compile"], cwd=dbt_project_dir, check=True)
 
     assert dbt_project_dir.joinpath("target", "manifest.json").exists()
@@ -82,12 +94,16 @@ def test_project_scaffold_command_with_precompiled_manifest(
     assert materialize_dbt_models_schedule.cron_schedule == "0 0 * * *"
 
 
+@pytest.mark.parametrize("use_dbt_project_package_data_dir", [True, False])
 def test_project_scaffold_command_with_runtime_manifest(
-    monkeypatch: pytest.MonkeyPatch, tmp_path: Path, dbt_project_dir: Path
+    monkeypatch: pytest.MonkeyPatch,
+    tmp_path: Path,
+    dbt_project_dir: Path,
+    use_dbt_project_package_data_dir: bool,
 ) -> None:
     monkeypatch.chdir(tmp_path)
 
-    project_name = "test_dagster_scaffold_runtime_manifest"
+    project_name = f"test_dagster_scaffold_runtime_manifest_{use_dbt_project_package_data_dir}"
     dagster_project_dir = tmp_path.joinpath(project_name)
 
     result = runner.invoke(
@@ -99,6 +115,7 @@ def test_project_scaffold_command_with_runtime_manifest(
             project_name,
             "--dbt-project-dir",
             os.fspath(dbt_project_dir),
+            *(["--use-dbt-project-package-data-dir"] if use_dbt_project_package_data_dir else []),
         ],
     )
 
@@ -111,6 +128,13 @@ def test_project_scaffold_command_with_runtime_manifest(
     assert not dbt_project_dir.joinpath("target", "manifest.json").exists()
     assert "dbt-duckdb" in dagster_project_dir.joinpath("setup.py").read_text()
 
+    if use_dbt_project_package_data_dir:
+        dbt_project_dir = dagster_project_dir.joinpath("dbt-project")
+        shutil.copytree(
+            src=test_dagster_metadata_dbt_project_path,
+            dst=dbt_project_dir,
+        )
+
     monkeypatch.chdir(tmp_path)
     sys.path.append(os.fspath(tmp_path))