diff --git a/mypy/test/testpep561.py b/mypy/test/testpep561.py
index ed8674e8d5bb..b8a11d7fc8af 100644
--- a/mypy/test/testpep561.py
+++ b/mypy/test/testpep561.py
@@ -47,22 +47,16 @@ def virtualenv(python_executable: str = sys.executable) -> Iterator[tuple[str, s
 
 
 def install_package(
-    pkg: str, python_executable: str = sys.executable, use_pip: bool = True, editable: bool = False
+    pkg: str, python_executable: str = sys.executable, editable: bool = False
 ) -> None:
     """Install a package from test-data/packages/pkg/"""
     working_dir = os.path.join(package_path, pkg)
     with tempfile.TemporaryDirectory() as dir:
-        if use_pip:
-            install_cmd = [python_executable, "-m", "pip", "install"]
-            if editable:
-                install_cmd.append("-e")
-            install_cmd.append(".")
-        else:
-            install_cmd = [python_executable, "setup.py"]
-            if editable:
-                install_cmd.append("develop")
-            else:
-                install_cmd.append("install")
+        install_cmd = [python_executable, "-m", "pip", "install"]
+        if editable:
+            install_cmd.append("-e")
+        install_cmd.append(".")
+
         # Note that newer versions of pip (21.3+) don't
         # follow this env variable, but this is for compatibility
         env = {"PIP_BUILD": dir}
@@ -82,21 +76,25 @@ def test_pep561(testcase: DataDrivenTestCase) -> None:
     assert testcase.old_cwd is not None, "test was not properly set up"
     python = sys.executable
 
+    if sys.version_info < (3, 8) and testcase.location[-1] == "testTypedPkgSimpleEditable":
+        # Python 3.7 doesn't ship with new enough pip to support PEP 660
+        # This is a quick hack to skip the test; we'll drop Python 3.7 support soon enough
+        return
+
     assert python is not None, "Should be impossible"
     pkgs, pip_args = parse_pkgs(testcase.input[0])
     mypy_args = parse_mypy_args(testcase.input[1])
-    use_pip = True
     editable = False
     for arg in pip_args:
-        if arg == "no-pip":
-            use_pip = False
-        elif arg == "editable":
+        if arg == "editable":
             editable = True
+        else:
+            raise ValueError(f"Unknown pip argument: {arg}")
     assert pkgs, "No packages to install for PEP 561 test?"
     with virtualenv(python) as venv:
         venv_dir, python_executable = venv
         for pkg in pkgs:
-            install_package(pkg, python_executable, use_pip, editable)
+            install_package(pkg, python_executable, editable)
 
         cmd_line = list(mypy_args)
         has_program = not ("-p" in cmd_line or "--package" in cmd_line)
diff --git a/test-data/packages/typedpkg-stubs/pyproject.toml b/test-data/packages/typedpkg-stubs/pyproject.toml
new file mode 100644
index 000000000000..125816151ef8
--- /dev/null
+++ b/test-data/packages/typedpkg-stubs/pyproject.toml
@@ -0,0 +1,11 @@
+[project]
+name = 'typedpkg-stubs'
+version = '0.1'
+description = 'test'
+
+[tool.hatch.build]
+include = ["**/*.pyi"]
+
+[build-system]
+requires = ["hatchling"]
+build-backend = "hatchling.build"
diff --git a/test-data/packages/typedpkg-stubs/setup.py b/test-data/packages/typedpkg-stubs/setup.py
deleted file mode 100644
index 4948dc6a01df..000000000000
--- a/test-data/packages/typedpkg-stubs/setup.py
+++ /dev/null
@@ -1,13 +0,0 @@
-"""
-This setup file installs packages to test mypy's PEP 561 implementation
-"""
-
-from setuptools import setup
-
-setup(
-    name='typedpkg-stubs',
-    author="The mypy team",
-    version='0.1',
-    package_data={'typedpkg-stubs': ['sample.pyi', '__init__.pyi', 'py.typed']},
-    packages=['typedpkg-stubs'],
-)
diff --git a/test-data/packages/typedpkg/pyproject.toml b/test-data/packages/typedpkg/pyproject.toml
new file mode 100644
index 000000000000..5269c94320e1
--- /dev/null
+++ b/test-data/packages/typedpkg/pyproject.toml
@@ -0,0 +1,8 @@
+[project]
+name = 'typedpkg'
+version = '0.1'
+description = 'test'
+
+[build-system]
+requires = ["hatchling"]
+build-backend = "hatchling.build"
diff --git a/test-data/packages/typedpkg/setup.py b/test-data/packages/typedpkg/setup.py
deleted file mode 100644
index 11bcfb11a104..000000000000
--- a/test-data/packages/typedpkg/setup.py
+++ /dev/null
@@ -1,15 +0,0 @@
-"""
-This setup file installs packages to test mypy's PEP 561 implementation
-"""
-
-from setuptools import setup
-
-setup(
-    name='typedpkg',
-    author="The mypy team",
-    version='0.1',
-    package_data={'typedpkg': ['py.typed']},
-    packages=['typedpkg', 'typedpkg.pkg'],
-    include_package_data=True,
-    zip_safe=False,
-)
diff --git a/test-data/packages/typedpkg_ns_a/pyproject.toml b/test-data/packages/typedpkg_ns_a/pyproject.toml
new file mode 100644
index 000000000000..cc464af75b17
--- /dev/null
+++ b/test-data/packages/typedpkg_ns_a/pyproject.toml
@@ -0,0 +1,11 @@
+[project]
+name = 'typedpkg_namespace.alpha'
+version = '0.1'
+description = 'test'
+
+[tool.hatch.build]
+include = ["**/*.py", "**/*.pyi", "**/py.typed"]
+
+[build-system]
+requires = ["hatchling"]
+build-backend = "hatchling.build"
diff --git a/test-data/packages/typedpkg_ns_a/setup.py b/test-data/packages/typedpkg_ns_a/setup.py
deleted file mode 100644
index 3dab731cada9..000000000000
--- a/test-data/packages/typedpkg_ns_a/setup.py
+++ /dev/null
@@ -1,10 +0,0 @@
-from setuptools import setup
-
-setup(
-    name='typedpkg_namespace.alpha',
-    version='1.0.0',
-    namespace_packages=['typedpkg_ns'],
-    zip_safe=False,
-    package_data={'typedpkg_ns.a': ['py.typed']},
-    packages=['typedpkg_ns.a'],
-)
diff --git a/test-data/packages/typedpkg_ns_b-stubs/pyproject.toml b/test-data/packages/typedpkg_ns_b-stubs/pyproject.toml
new file mode 100644
index 000000000000..d5275d1ed8b3
--- /dev/null
+++ b/test-data/packages/typedpkg_ns_b-stubs/pyproject.toml
@@ -0,0 +1,11 @@
+[project]
+name = 'typedpkg_ns-stubs'
+version = '0.1'
+description = 'test'
+
+[tool.hatch.build]
+include = ["**/*.pyi"]
+
+[build-system]
+requires = ["hatchling"]
+build-backend = "hatchling.build"
diff --git a/test-data/packages/typedpkg_ns_b-stubs/setup.py b/test-data/packages/typedpkg_ns_b-stubs/setup.py
deleted file mode 100644
index a5d7df83eeea..000000000000
--- a/test-data/packages/typedpkg_ns_b-stubs/setup.py
+++ /dev/null
@@ -1,14 +0,0 @@
-"""
-This setup file installs packages to test mypy's PEP 561 implementation
-"""
-
-from distutils.core import setup
-
-setup(
-    name='typedpkg_ns_b-stubs',
-    author="The mypy team",
-    version='0.1',
-    namespace_packages=['typedpkg_ns-stubs'],
-    package_data={'typedpkg_ns-stubs.b': ['__init__.pyi', 'bbb.pyi']},
-    packages=['typedpkg_ns-stubs.b'],
-)
diff --git a/test-data/packages/typedpkg_ns_b/pyproject.toml b/test-data/packages/typedpkg_ns_b/pyproject.toml
new file mode 100644
index 000000000000..8567af11152e
--- /dev/null
+++ b/test-data/packages/typedpkg_ns_b/pyproject.toml
@@ -0,0 +1,8 @@
+[project]
+name = 'typedpkg_namespace.beta'
+version = '0.1'
+description = 'test'
+
+[build-system]
+requires = ["hatchling"]
+build-backend = "hatchling.build"
diff --git a/test-data/packages/typedpkg_ns_b/setup.py b/test-data/packages/typedpkg_ns_b/setup.py
deleted file mode 100644
index 4f0d0d954a73..000000000000
--- a/test-data/packages/typedpkg_ns_b/setup.py
+++ /dev/null
@@ -1,10 +0,0 @@
-from setuptools import setup
-
-setup(
-    name='typedpkg_namespace.beta',
-    version='1.0.0',
-    namespace_packages=['typedpkg_ns'],
-    zip_safe=False,
-    package_data={'typedpkg_ns.b': []},
-    packages=['typedpkg_ns.b'],
-)
diff --git a/test-data/unit/pep561.test b/test-data/unit/pep561.test
index 8c401cfc3c51..e8ebbd03dca7 100644
--- a/test-data/unit/pep561.test
+++ b/test-data/unit/pep561.test
@@ -72,15 +72,6 @@ reveal_type(a)
 [out]
 testStubPrecedence.py:5: note: Revealed type is "builtins.list[builtins.str]"
 
-[case testTypedPkgSimpleEgg]
-# pkgs: typedpkg; no-pip
-from typedpkg.sample import ex
-from typedpkg import dne
-a = ex([''])
-reveal_type(a)
-[out]
-testTypedPkgSimpleEgg.py:5: note: Revealed type is "builtins.tuple[builtins.str, ...]"
-
 [case testTypedPkgSimpleEditable]
 # pkgs: typedpkg; editable
 from typedpkg.sample import ex
@@ -90,15 +81,6 @@ reveal_type(a)
 [out]
 testTypedPkgSimpleEditable.py:5: note: Revealed type is "builtins.tuple[builtins.str, ...]"
 
-[case testTypedPkgSimpleEditableEgg]
-# pkgs: typedpkg; editable; no-pip
-from typedpkg.sample import ex
-from typedpkg import dne
-a = ex([''])
-reveal_type(a)
-[out]
-testTypedPkgSimpleEditableEgg.py:5: note: Revealed type is "builtins.tuple[builtins.str, ...]"
-
 [case testTypedPkgNamespaceImportFrom]
 # pkgs: typedpkg, typedpkg_ns_a
 from typedpkg.pkg.aaa import af