diff --git a/packages/build/src/commands/constants.js b/packages/build/src/commands/constants.js
index 3cb2bbb01d..add94e7ae6 100644
--- a/packages/build/src/commands/constants.js
+++ b/packages/build/src/commands/constants.js
@@ -2,6 +2,9 @@
 
 const pathExists = require('path-exists')
 
+// @todo Remove once we drop support for the legact default functions directory.
+const { LEGACY_DEFAULT_FUNCTIONS_DIR } = require('../core/constants')
+
 // Some `constants` have a default value when a specific file exists.
 // Those default values are assigned by `@netlify/config`. However, the build
 // command or plugins might create those specific files, in which case, the
@@ -19,7 +22,9 @@ const getConstants = async function ({ constants, buildDir }) {
 // The current directory is the build directory, which is correct, so we don't
 // need to resolve paths
 const DEFAULT_PATHS = [
-  { constantName: 'FUNCTIONS_SRC', defaultPath: 'netlify-automatic-functions' },
+  // @todo Remove once we drop support for the legact default functions directory.
+  { constantName: 'FUNCTIONS_SRC', defaultPath: LEGACY_DEFAULT_FUNCTIONS_DIR },
+  { constantName: 'FUNCTIONS_SRC', defaultPath: 'netlify/functions' },
   { constantName: 'EDGE_HANDLERS_SRC', defaultPath: 'edge-handlers' },
 ]
 
diff --git a/packages/build/src/core/constants.js b/packages/build/src/core/constants.js
index 1466b120ef..b2685042e2 100644
--- a/packages/build/src/core/constants.js
+++ b/packages/build/src/core/constants.js
@@ -1,13 +1,21 @@
 'use strict'
 
-const { relative, normalize, join } = require('path')
+const { relative, normalize } = require('path')
 
 const { getCacheDir } = require('@netlify/cache-utils')
 const mapObj = require('map-obj')
 const pathExists = require('path-exists')
 
 const { version } = require('../../package.json')
-const { logDefaultFunctionsSrcWarning, logNetlifyDirWarning } = require('../log/messages/core')
+const { logLegacyDefaultFunctionsSrcWarning } = require('../log/messages/core')
+
+// @todo Remove once we drop support for the legact default functions directory.
+const LEGACY_DEFAULT_FUNCTIONS_DIR = 'netlify-automatic-functions'
+const checkForLegacyDefaultFunctionsDir = async function (logs, buildDir) {
+  if (await pathExists(`${buildDir}/${LEGACY_DEFAULT_FUNCTIONS_DIR}`)) {
+    logLegacyDefaultFunctionsSrcWarning(logs, LEGACY_DEFAULT_FUNCTIONS_DIR)
+  }
+}
 
 // Retrieve constants passed to plugins
 const getConstants = async function ({
@@ -22,7 +30,8 @@ const getConstants = async function ({
   mode,
   logs,
 }) {
-  await validateNetlifyDir(logs, buildDir)
+  // @todo Remove once we drop support for the legact default functions directory.
+  await checkForLegacyDefaultFunctionsDir(logs, buildDir)
 
   const isLocal = mode !== 'buildbot'
   const cacheDir = await getCacheDir({ mode })
@@ -73,22 +82,6 @@ const getConstants = async function ({
   return constantsA
 }
 
-// Temporary warning until we launch this feature in February 2021
-// TODO: remove once the feature is launched
-const validateNetlifyDir = async function (logs, buildDir) {
-  if (await pathExists(`${buildDir}/${DEFAULT_FUNCTIONS_SRC}`)) {
-    logDefaultFunctionsSrcWarning(logs, NETLIFY_DIR, DEFAULT_FUNCTIONS_SRC)
-    return
-  }
-
-  if (await pathExists(`${buildDir}/${NETLIFY_DIR}`)) {
-    logNetlifyDirWarning(logs, NETLIFY_DIR, DEFAULT_FUNCTIONS_SRC)
-  }
-}
-
-const NETLIFY_DIR = 'netlify'
-const DEFAULT_FUNCTIONS_SRC = join(NETLIFY_DIR, 'functions')
-
 // The current directory is `buildDir`. Most constants are inside this `buildDir`.
 // Instead of passing absolute paths, we pass paths relative to `buildDir`, so
 // that logs are less verbose.
@@ -115,4 +108,9 @@ const CONSTANT_PATHS = new Set([
   'CACHE_DIR',
 ])
 
-module.exports = { getConstants }
+module.exports = {
+  getConstants,
+
+  // @todo Remove once we drop support for the legact default functions directory.
+  LEGACY_DEFAULT_FUNCTIONS_DIR,
+}
diff --git a/packages/build/src/log/messages/core.js b/packages/build/src/log/messages/core.js
index 63b2d2b27c..255abe2283 100644
--- a/packages/build/src/log/messages/core.js
+++ b/packages/build/src/log/messages/core.js
@@ -19,28 +19,6 @@ const logBuildStart = function (logs) {
   logMessage(logs, `${name} ${version}`)
 }
 
-const logDefaultFunctionsSrcWarning = function (logs, netlifyDir, defaultFunctionsSrc) {
-  logError(
-    logs,
-    `
-Detected site repository path: "${defaultFunctionsSrc}"
-Starting in February 2021, this path will be used to detect and deploy Netlify functions.
-To avoid potential build failures or irregularities, we recommend changing the name of the "${netlifyDir}" directory.
-For more information, visit the Community update notification: community.netlify.com/t/upcoming-change-netlify-functions-as-zero-config-default-folder-for-deploying-netlify-functions/28789`,
-  )
-}
-
-const logNetlifyDirWarning = function (logs, netlifyDir, defaultFunctionsSrc) {
-  logError(
-    logs,
-    `
-Detected site repository path: "${netlifyDir}"
-Netlify will begin using this path for detecting default deployment features, starting with "${defaultFunctionsSrc}" in February 2021.
-To avoid potential build failures or irregularities in the future, we recommend changing the name of the "${netlifyDir}" directory.
-For more information, visit the Community update notification: community.netlify.com/t/upcoming-change-netlify-functions-as-zero-config-default-folder-for-deploying-netlify-functions/28789`,
-  )
-}
-
 const logBuildError = function ({ error, netlifyConfig, mode, logs, debug, testOpts }) {
   const fullErrorInfo = getFullErrorInfo({ error, colors: true, debug })
   const { severity } = fullErrorInfo
@@ -78,12 +56,25 @@ failed since something is still running.`),
   )
 }
 
+const logLegacyDefaultFunctionsSrcWarning = function (logs, legacyDefaultFunctionsSrc) {
+  logError(
+    logs,
+    `
+Detected site repository path: \`${legacyDefaultFunctionsSrc}\`. Netlify no longer recognizes this path as a default Functions directory location and can’t detect and build serverless functions stored there.
+
+If you created this directory yourself, we recommend that you:
+- rename the Functions directory to \`netlify/functions\`
+- or explicitly set \`${legacyDefaultFunctionsSrc}\` as the Functions directory in your site’s build settings.
+
+If you are using the \`@netlify/plugin-nextjs\` plugin, you should update it by running \`npm install @netlify/plugin-nextjs\` in your project directory.`,
+  )
+}
+
 module.exports = {
   logBuildStart,
-  logDefaultFunctionsSrcWarning,
-  logNetlifyDirWarning,
   logBuildError,
   logBuildSuccess,
   logTimer,
   logLingeringProcesses,
+  logLegacyDefaultFunctionsSrcWarning,
 }
diff --git a/packages/build/tests/commands/snapshots/tests.js.snap b/packages/build/tests/commands/snapshots/tests.js.snap
index d2f686984e..42306a4a9a 100644
Binary files a/packages/build/tests/commands/snapshots/tests.js.snap and b/packages/build/tests/commands/snapshots/tests.js.snap differ
diff --git a/packages/build/tests/core/snapshots/tests.js.md b/packages/build/tests/core/snapshots/tests.js.md
index 3eb0e39c82..c7ade1609a 100644
--- a/packages/build/tests/core/snapshots/tests.js.md
+++ b/packages/build/tests/core/snapshots/tests.js.md
@@ -945,92 +945,6 @@ Generated by [AVA](https://ava.li).
     ␊
     (Netlify Build completed in 1ms)`
 
-## Print a warning message when "netlify" directory is used
-
-> Snapshot 1
-
-    `␊
-    ────────────────────────────────────────────────────────────────␊
-      Netlify Build                                                 ␊
-    ────────────────────────────────────────────────────────────────␊
-    ␊
-    > Version␊
-      @netlify/build 1.0.0␊
-    ␊
-    > Flags␊
-      debug: true␊
-      featureFlags: {}␊
-      repositoryRoot: /file/path␊
-      testOpts:␊
-        pluginsListUrl: test␊
-        silentLingeringProcesses: true␊
-    ␊
-    > Current directory␊
-      /file/path␊
-    ␊
-    > Config file␊
-      No config file was defined: using default values.␊
-    ␊
-    > Resolved config␊
-      {}␊
-    ␊
-    > Context␊
-      production␊
-    ␊
-    Detected site repository path: "netlify"␊
-    Netlify will begin using this path for detecting default deployment features, starting with "netlify/functions" in February 2021.␊
-    To avoid potential build failures or irregularities in the future, we recommend changing the name of the "netlify" directory.␊
-    For more information, visit the Community update notification: community.netlify.com/t/upcoming-change-netlify-functions-as-zero-config-default-folder-for-deploying-netlify-functions/28789␊
-    ␊
-    ────────────────────────────────────────────────────────────────␊
-      Netlify Build Complete                                        ␊
-    ────────────────────────────────────────────────────────────────␊
-    ␊
-    (Netlify Build completed in 1ms)`
-
-## Print a warning message when "netlify/functions" directory is used
-
-> Snapshot 1
-
-    `␊
-    ────────────────────────────────────────────────────────────────␊
-      Netlify Build                                                 ␊
-    ────────────────────────────────────────────────────────────────␊
-    ␊
-    > Version␊
-      @netlify/build 1.0.0␊
-    ␊
-    > Flags␊
-      debug: true␊
-      featureFlags: {}␊
-      repositoryRoot: /file/path␊
-      testOpts:␊
-        pluginsListUrl: test␊
-        silentLingeringProcesses: true␊
-    ␊
-    > Current directory␊
-      /file/path␊
-    ␊
-    > Config file␊
-      No config file was defined: using default values.␊
-    ␊
-    > Resolved config␊
-      {}␊
-    ␊
-    > Context␊
-      production␊
-    ␊
-    Detected site repository path: "netlify/functions"␊
-    Starting in February 2021, this path will be used to detect and deploy Netlify functions.␊
-    To avoid potential build failures or irregularities, we recommend changing the name of the "netlify" directory.␊
-    For more information, visit the Community update notification: community.netlify.com/t/upcoming-change-netlify-functions-as-zero-config-default-folder-for-deploying-netlify-functions/28789␊
-    ␊
-    ────────────────────────────────────────────────────────────────␊
-      Netlify Build Complete                                        ␊
-    ────────────────────────────────────────────────────────────────␊
-    ␊
-    (Netlify Build completed in 1ms)`
-
 ## Telemetry error
 
 > Snapshot 1
diff --git a/packages/build/tests/core/snapshots/tests.js.snap b/packages/build/tests/core/snapshots/tests.js.snap
index 0362c17195..d3340baa56 100644
Binary files a/packages/build/tests/core/snapshots/tests.js.snap and b/packages/build/tests/core/snapshots/tests.js.snap differ
diff --git a/packages/build/tests/core/tests.js b/packages/build/tests/core/tests.js
index d325767ae3..64218e9b77 100644
--- a/packages/build/tests/core/tests.js
+++ b/packages/build/tests/core/tests.js
@@ -193,14 +193,6 @@ test('--featureFlags can be used', async (t) => {
   await runFixture(t, 'empty', { flags: { featureFlags: 'test,test,testTwo' } })
 })
 
-test('Print a warning message when "netlify" directory is used', async (t) => {
-  await runFixture(t, 'netlify_dir')
-})
-
-test('Print a warning message when "netlify/functions" directory is used', async (t) => {
-  await runFixture(t, 'netlify_functions_dir')
-})
-
 // Normalize telemetry request so it can be snapshot
 const normalizeSnapshot = function ({ body, ...request }) {
   return { ...request, body: normalizeBody(body) }
diff --git a/packages/build/tests/env/snapshots/tests.js.snap b/packages/build/tests/env/snapshots/tests.js.snap
index b642fff0b4..02e0fef071 100644
Binary files a/packages/build/tests/env/snapshots/tests.js.snap and b/packages/build/tests/env/snapshots/tests.js.snap differ
diff --git a/packages/build/tests/error/snapshots/tests.js.snap b/packages/build/tests/error/snapshots/tests.js.snap
index 4f3209d8a8..8b6398c082 100644
Binary files a/packages/build/tests/error/snapshots/tests.js.snap and b/packages/build/tests/error/snapshots/tests.js.snap differ
diff --git a/packages/build/tests/install/snapshots/tests.js.snap b/packages/build/tests/install/snapshots/tests.js.snap
index fb24c14942..9a911fc93c 100644
Binary files a/packages/build/tests/install/snapshots/tests.js.snap and b/packages/build/tests/install/snapshots/tests.js.snap differ
diff --git a/packages/build/tests/manifest/snapshots/tests.js.snap b/packages/build/tests/manifest/snapshots/tests.js.snap
index 74b813e3ca..ff8b504c05 100644
Binary files a/packages/build/tests/manifest/snapshots/tests.js.snap and b/packages/build/tests/manifest/snapshots/tests.js.snap differ
diff --git a/packages/build/tests/plugins/fixtures/functions_src_default_and_legacy/manifest.yml b/packages/build/tests/plugins/fixtures/functions_src_default_and_legacy/manifest.yml
new file mode 100644
index 0000000000..a3512f0259
--- /dev/null
+++ b/packages/build/tests/plugins/fixtures/functions_src_default_and_legacy/manifest.yml
@@ -0,0 +1,2 @@
+name: test
+inputs: []
diff --git a/packages/build/tests/core/fixtures/netlify_dir/netlify/.gitkeep b/packages/build/tests/plugins/fixtures/functions_src_default_and_legacy/netlify-automatic-functions/.gitkeep
similarity index 100%
rename from packages/build/tests/core/fixtures/netlify_dir/netlify/.gitkeep
rename to packages/build/tests/plugins/fixtures/functions_src_default_and_legacy/netlify-automatic-functions/.gitkeep
diff --git a/packages/build/tests/plugins/fixtures/functions_src_default_and_legacy/netlify.toml b/packages/build/tests/plugins/fixtures/functions_src_default_and_legacy/netlify.toml
new file mode 100644
index 0000000000..81b0ce8bb1
--- /dev/null
+++ b/packages/build/tests/plugins/fixtures/functions_src_default_and_legacy/netlify.toml
@@ -0,0 +1,2 @@
+[[plugins]]
+package = "./plugin"
diff --git a/packages/build/tests/core/fixtures/netlify_functions_dir/netlify/functions/.gitkeep b/packages/build/tests/plugins/fixtures/functions_src_default_and_legacy/netlify/functions/.gitkeep
similarity index 100%
rename from packages/build/tests/core/fixtures/netlify_functions_dir/netlify/functions/.gitkeep
rename to packages/build/tests/plugins/fixtures/functions_src_default_and_legacy/netlify/functions/.gitkeep
diff --git a/packages/build/tests/plugins/fixtures/functions_src_default_and_legacy/plugin.js b/packages/build/tests/plugins/fixtures/functions_src_default_and_legacy/plugin.js
new file mode 100644
index 0000000000..6d4d9c04c7
--- /dev/null
+++ b/packages/build/tests/plugins/fixtures/functions_src_default_and_legacy/plugin.js
@@ -0,0 +1,7 @@
+'use strict'
+
+module.exports = {
+  onPreBuild({ constants: { FUNCTIONS_SRC } }) {
+    console.log(FUNCTIONS_SRC)
+  },
+}
diff --git a/packages/build/tests/plugins/fixtures/functions_src_dynamic/plugin.js b/packages/build/tests/plugins/fixtures/functions_src_dynamic/plugin.js
index ebeb6b3390..de993cb339 100644
--- a/packages/build/tests/plugins/fixtures/functions_src_dynamic/plugin.js
+++ b/packages/build/tests/plugins/fixtures/functions_src_dynamic/plugin.js
@@ -1,21 +1,24 @@
 'use strict'
 
 const { mkdir, rmdir } = require('fs')
+const { dirname } = require('path')
 const { promisify } = require('util')
 
 const pMkdir = promisify(mkdir)
 const pRmdir = promisify(rmdir)
 
-const DEFAULT_FUNCTIONS_SRC = 'netlify-automatic-functions'
+const DEFAULT_FUNCTIONS_SRC = 'netlify/functions'
 
 module.exports = {
   async onPreBuild({ constants: { FUNCTIONS_SRC } }) {
     console.log(FUNCTIONS_SRC === undefined)
+    await pMkdir(dirname(DEFAULT_FUNCTIONS_SRC))
     await pMkdir(DEFAULT_FUNCTIONS_SRC)
   },
   async onBuild({ constants: { FUNCTIONS_SRC } }) {
     console.log(FUNCTIONS_SRC)
     await pRmdir(DEFAULT_FUNCTIONS_SRC)
+    await pRmdir(dirname(DEFAULT_FUNCTIONS_SRC))
   },
   onPostBuild({ constants: { FUNCTIONS_SRC } }) {
     console.log(FUNCTIONS_SRC === undefined)
diff --git a/packages/build/tests/plugins/fixtures/functions_src_dynamic_bundle/plugin.js b/packages/build/tests/plugins/fixtures/functions_src_dynamic_bundle/plugin.js
index 46d5fdf012..6c48a28ce7 100644
--- a/packages/build/tests/plugins/fixtures/functions_src_dynamic_bundle/plugin.js
+++ b/packages/build/tests/plugins/fixtures/functions_src_dynamic_bundle/plugin.js
@@ -1,14 +1,16 @@
 'use strict'
 
 const { mkdir } = require('fs')
+const { dirname } = require('path')
 const { promisify } = require('util')
 
 const pMkdir = promisify(mkdir)
 
-const DEFAULT_FUNCTIONS_SRC = 'netlify-automatic-functions'
+const DEFAULT_FUNCTIONS_SRC = 'netlify/functions'
 
 module.exports = {
   async onPreBuild() {
+    await pMkdir(dirname(DEFAULT_FUNCTIONS_SRC))
     await pMkdir(DEFAULT_FUNCTIONS_SRC)
   },
 }
diff --git a/packages/build/tests/plugins/fixtures/functions_src_dynamic_ignore/plugin.js b/packages/build/tests/plugins/fixtures/functions_src_dynamic_ignore/plugin.js
index 775af8c26e..a97b32d542 100644
--- a/packages/build/tests/plugins/fixtures/functions_src_dynamic_ignore/plugin.js
+++ b/packages/build/tests/plugins/fixtures/functions_src_dynamic_ignore/plugin.js
@@ -1,15 +1,17 @@
 'use strict'
 
 const { mkdir } = require('fs')
+const { dirname } = require('path')
 const { promisify } = require('util')
 
 const pMkdir = promisify(mkdir)
 
-const DEFAULT_FUNCTIONS_SRC = 'netlify-automatic-functions'
+const DEFAULT_FUNCTIONS_SRC = 'netlify/functions'
 
 module.exports = {
   async onPreBuild({ constants: { FUNCTIONS_SRC } }) {
     console.log(FUNCTIONS_SRC.endsWith('test'))
+    await pMkdir(dirname(DEFAULT_FUNCTIONS_SRC))
     await pMkdir(DEFAULT_FUNCTIONS_SRC)
   },
   onBuild({ constants: { FUNCTIONS_SRC } }) {
diff --git a/packages/build/tests/plugins/fixtures/functions_src_legacy/manifest.yml b/packages/build/tests/plugins/fixtures/functions_src_legacy/manifest.yml
new file mode 100644
index 0000000000..a3512f0259
--- /dev/null
+++ b/packages/build/tests/plugins/fixtures/functions_src_legacy/manifest.yml
@@ -0,0 +1,2 @@
+name: test
+inputs: []
diff --git a/packages/config/tests/normalize/fixtures/default_functions_not_defined/netlify-automatic-functions/.gitkeep b/packages/build/tests/plugins/fixtures/functions_src_legacy/netlify-automatic-functions/.gitkeep
similarity index 100%
rename from packages/config/tests/normalize/fixtures/default_functions_not_defined/netlify-automatic-functions/.gitkeep
rename to packages/build/tests/plugins/fixtures/functions_src_legacy/netlify-automatic-functions/.gitkeep
diff --git a/packages/build/tests/plugins/fixtures/functions_src_legacy/netlify.toml b/packages/build/tests/plugins/fixtures/functions_src_legacy/netlify.toml
new file mode 100644
index 0000000000..81b0ce8bb1
--- /dev/null
+++ b/packages/build/tests/plugins/fixtures/functions_src_legacy/netlify.toml
@@ -0,0 +1,2 @@
+[[plugins]]
+package = "./plugin"
diff --git a/packages/build/tests/plugins/fixtures/functions_src_legacy/plugin.js b/packages/build/tests/plugins/fixtures/functions_src_legacy/plugin.js
new file mode 100644
index 0000000000..6d4d9c04c7
--- /dev/null
+++ b/packages/build/tests/plugins/fixtures/functions_src_legacy/plugin.js
@@ -0,0 +1,7 @@
+'use strict'
+
+module.exports = {
+  onPreBuild({ constants: { FUNCTIONS_SRC } }) {
+    console.log(FUNCTIONS_SRC)
+  },
+}
diff --git a/packages/build/tests/plugins/snapshots/tests.js.md b/packages/build/tests/plugins/snapshots/tests.js.md
index b7a5fd412e..db7a82d48e 100644
--- a/packages/build/tests/plugins/snapshots/tests.js.md
+++ b/packages/build/tests/plugins/snapshots/tests.js.md
@@ -3778,7 +3778,7 @@ Generated by [AVA](https://ava.li).
       2. onBuild command from /file/path                              ␊
     ────────────────────────────────────────────────────────────────␊
     ␊
-    netlify-automatic-functions␊
+    netlify/functions␊
     ␊
     (/file/path onBuild completed in 1ms)␊
     ␊
@@ -3967,7 +3967,77 @@ Generated by [AVA](https://ava.li).
       2. Functions bundling                                         ␊
     ────────────────────────────────────────────────────────────────␊
     ␊
-    No Functions were found in netlify-automatic-functions directory␊
+    No Functions were found in netlify/functions directory␊
+    ␊
+    (Functions bundling completed in 1ms)␊
+    ␊
+    ────────────────────────────────────────────────────────────────␊
+      Netlify Build Complete                                        ␊
+    ────────────────────────────────────────────────────────────────␊
+    ␊
+    (Netlify Build completed in 1ms)`
+
+## constants.FUNCTIONS_SRC ignores the legacy default functions directory if the new default directory exists
+
+> Snapshot 1
+
+    `␊
+    ────────────────────────────────────────────────────────────────␊
+      Netlify Build                                                 ␊
+    ────────────────────────────────────────────────────────────────␊
+    ␊
+    > Version␊
+      @netlify/build 1.0.0␊
+    ␊
+    > Flags␊
+      debug: true␊
+      featureFlags: {}␊
+      repositoryRoot: /file/path␊
+      testOpts:␊
+        pluginsListUrl: test␊
+        silentLingeringProcesses: true␊
+    ␊
+    > Current directory␊
+      /file/path␊
+    ␊
+    > Config file␊
+      /file/path␊
+    ␊
+    > Resolved config␊
+      build:␊
+        functions: /file/path␊
+      plugins:␊
+        - inputs: {}␊
+          origin: config␊
+          package: /file/path␊
+    ␊
+    > Context␊
+      production␊
+    ␊
+    Detected site repository path: `netlify-automatic-functions`. Netlify no longer recognizes this path as a default Functions directory location and can’t detect and build serverless functions stored there.␊
+    ␊
+    If you created this directory yourself, we recommend that you:␊
+    - rename the Functions directory to `netlify/functions`␊
+    - or explicitly set `netlify-automatic-functions` as the Functions directory in your site’s build settings.␊
+    ␊
+    If you are using the `@netlify/plugin-nextjs` plugin, you should update it by running `npm install @netlify/plugin-nextjs` in your project directory.␊
+    ␊
+    > Loading plugins␊
+       - /file/path from netlify.toml␊
+    ␊
+    ────────────────────────────────────────────────────────────────␊
+      1. onPreBuild command from /file/path                           ␊
+    ────────────────────────────────────────────────────────────────␊
+    ␊
+    netlify/functions␊
+    ␊
+    (/file/path onPreBuild completed in 1ms)␊
+    ␊
+    ────────────────────────────────────────────────────────────────␊
+      2. Functions bundling                                         ␊
+    ────────────────────────────────────────────────────────────────␊
+    ␊
+    No Functions were found in netlify/functions directory␊
     ␊
     (Functions bundling completed in 1ms)␊
     ␊
@@ -4101,6 +4171,76 @@ Generated by [AVA](https://ava.li).
     ␊
     (Netlify Build completed in 1ms)`
 
+## constants.FUNCTIONS_SRC uses legacy default functions directory, if it exists, and shows a warning
+
+> Snapshot 1
+
+    `␊
+    ────────────────────────────────────────────────────────────────␊
+      Netlify Build                                                 ␊
+    ────────────────────────────────────────────────────────────────␊
+    ␊
+    > Version␊
+      @netlify/build 1.0.0␊
+    ␊
+    > Flags␊
+      debug: true␊
+      featureFlags: {}␊
+      repositoryRoot: /file/path␊
+      testOpts:␊
+        pluginsListUrl: test␊
+        silentLingeringProcesses: true␊
+    ␊
+    > Current directory␊
+      /file/path␊
+    ␊
+    > Config file␊
+      /file/path␊
+    ␊
+    > Resolved config␊
+      build:␊
+        functions: /file/path␊
+      plugins:␊
+        - inputs: {}␊
+          origin: config␊
+          package: /file/path␊
+    ␊
+    > Context␊
+      production␊
+    ␊
+    Detected site repository path: `netlify-automatic-functions`. Netlify no longer recognizes this path as a default Functions directory location and can’t detect and build serverless functions stored there.␊
+    ␊
+    If you created this directory yourself, we recommend that you:␊
+    - rename the Functions directory to `netlify/functions`␊
+    - or explicitly set `netlify-automatic-functions` as the Functions directory in your site’s build settings.␊
+    ␊
+    If you are using the `@netlify/plugin-nextjs` plugin, you should update it by running `npm install @netlify/plugin-nextjs` in your project directory.␊
+    ␊
+    > Loading plugins␊
+       - /file/path from netlify.toml␊
+    ␊
+    ────────────────────────────────────────────────────────────────␊
+      1. onPreBuild command from /file/path                           ␊
+    ────────────────────────────────────────────────────────────────␊
+    ␊
+    netlify-automatic-functions␊
+    ␊
+    (/file/path onPreBuild completed in 1ms)␊
+    ␊
+    ────────────────────────────────────────────────────────────────␊
+      2. Functions bundling                                         ␊
+    ────────────────────────────────────────────────────────────────␊
+    ␊
+    No Functions were found in netlify-automatic-functions directory␊
+    ␊
+    (Functions bundling completed in 1ms)␊
+    ␊
+    ────────────────────────────────────────────────────────────────␊
+      Netlify Build Complete                                        ␊
+    ────────────────────────────────────────────────────────────────␊
+    ␊
+    (Netlify Build completed in 1ms)`
+
 ## constants.IS_LOCAL CI
 
 > Snapshot 1
diff --git a/packages/build/tests/plugins/snapshots/tests.js.snap b/packages/build/tests/plugins/snapshots/tests.js.snap
index 92cf2cabd8..aaa3552501 100644
Binary files a/packages/build/tests/plugins/snapshots/tests.js.snap and b/packages/build/tests/plugins/snapshots/tests.js.snap differ
diff --git a/packages/build/tests/plugins/tests.js b/packages/build/tests/plugins/tests.js
index 769e005c51..33e50edba8 100644
--- a/packages/build/tests/plugins/tests.js
+++ b/packages/build/tests/plugins/tests.js
@@ -50,6 +50,14 @@ test('constants.FUNCTIONS_SRC default value', async (t) => {
   await runFixture(t, 'functions_src_default')
 })
 
+test('constants.FUNCTIONS_SRC uses legacy default functions directory, if it exists, and shows a warning', async (t) => {
+  await runFixture(t, 'functions_src_legacy')
+})
+
+test('constants.FUNCTIONS_SRC ignores the legacy default functions directory if the new default directory exists', async (t) => {
+  await runFixture(t, 'functions_src_default_and_legacy')
+})
+
 test('constants.FUNCTIONS_SRC relative path', async (t) => {
   await runFixture(t, 'functions_src_relative')
 })
diff --git a/packages/build/tests/status/snapshots/tests.js.snap b/packages/build/tests/status/snapshots/tests.js.snap
index ccd641202d..189a5eed3f 100644
Binary files a/packages/build/tests/status/snapshots/tests.js.snap and b/packages/build/tests/status/snapshots/tests.js.snap differ
diff --git a/packages/config/src/files.js b/packages/config/src/files.js
index 8355d6f810..a5877dcf81 100644
--- a/packages/config/src/files.js
+++ b/packages/config/src/files.js
@@ -84,7 +84,9 @@ const addDefaultPaths = async function (build, baseRel) {
 }
 
 const DEFAULT_PATHS = [
+  // @todo Remove once we drop support for the legact default functions directory.
   { property: 'functions', defaultPath: 'netlify-automatic-functions' },
+  { property: 'functions', defaultPath: 'netlify/functions' },
   { property: 'edge_handlers', defaultPath: 'edge-handlers' },
 ]
 
diff --git a/packages/config/tests/api/snapshots/tests.js.snap b/packages/config/tests/api/snapshots/tests.js.snap
index fb1a6d95c7..cdc7b2457f 100644
Binary files a/packages/config/tests/api/snapshots/tests.js.snap and b/packages/config/tests/api/snapshots/tests.js.snap differ
diff --git a/packages/config/tests/cli/snapshots/tests.js.snap b/packages/config/tests/cli/snapshots/tests.js.snap
index 8719b4ac6a..1f5e62619c 100644
Binary files a/packages/config/tests/cli/snapshots/tests.js.snap and b/packages/config/tests/cli/snapshots/tests.js.snap differ
diff --git a/packages/config/tests/log/snapshots/tests.js.snap b/packages/config/tests/log/snapshots/tests.js.snap
index 329fe83e36..fc2855fed2 100644
Binary files a/packages/config/tests/log/snapshots/tests.js.snap and b/packages/config/tests/log/snapshots/tests.js.snap differ
diff --git a/packages/config/tests/normalize/fixtures/default_functions_not_defined/netlify/functions/.gitkeep b/packages/config/tests/normalize/fixtures/default_functions_not_defined/netlify/functions/.gitkeep
new file mode 100644
index 0000000000..e69de29bb2
diff --git a/packages/config/tests/normalize/fixtures/default_functions_not_defined_directory_not_found/.gitkeep b/packages/config/tests/normalize/fixtures/default_functions_not_defined_directory_not_found/.gitkeep
new file mode 100644
index 0000000000..e69de29bb2
diff --git a/packages/config/tests/normalize/snapshots/tests.js.md b/packages/config/tests/normalize/snapshots/tests.js.md
index fa95191c7e..f19c2af70e 100644
--- a/packages/config/tests/normalize/snapshots/tests.js.md
+++ b/packages/config/tests/normalize/snapshots/tests.js.md
@@ -353,7 +353,7 @@ Generated by [AVA](https://ava.li).
       "siteInfo": {}␊
     }`
 
-## Assign default functions if build.functions is not defined
+## Assign default functions if build.functions is not defined and default directory exists
 
 > Snapshot 1
 
@@ -784,6 +784,91 @@ Generated by [AVA](https://ava.li).
       "siteInfo": {}␊
     }`
 
+## Does not assign default functions if default functions directory does not exist
+
+> Snapshot 1
+
+    `{␊
+      "branch": "branch",␊
+      "buildDir": "/file/path",␊
+      "config": {␊
+        "build": {␊
+          "environment": {}␊
+        },␊
+        "plugins": []␊
+      },␊
+      "context": "production",␊
+      "env": {␊
+        "BRANCH": {␊
+          "sources": [␊
+            "general"␊
+          ],␊
+          "value": "branch"␊
+        },␊
+        "CACHED_COMMIT_REF": {␊
+          "sources": [␊
+            "general"␊
+          ],␊
+          "value": "HEXADECIMAL_ID"␊
+        },␊
+        "COMMIT_REF": {␊
+          "sources": [␊
+            "general"␊
+          ],␊
+          "value": "HEXADECIMAL_ID"␊
+        },␊
+        "CONTEXT": {␊
+          "sources": [␊
+            "general"␊
+          ],␊
+          "value": "production"␊
+        },␊
+        "GATSBY_TELEMETRY_DISABLED": {␊
+          "sources": [␊
+            "general"␊
+          ],␊
+          "value": "1"␊
+        },␊
+        "HEAD": {␊
+          "sources": [␊
+            "general"␊
+          ],␊
+          "value": "branch"␊
+        },␊
+        "LANG": {␊
+          "sources": [␊
+            "general"␊
+          ],␊
+          "value": "en_US.UTF-8"␊
+        },␊
+        "LANGUAGE": {␊
+          "sources": [␊
+            "general"␊
+          ],␊
+          "value": "en_US:en"␊
+        },␊
+        "LC_ALL": {␊
+          "sources": [␊
+            "general"␊
+          ],␊
+          "value": "en_US.UTF-8"␊
+        },␊
+        "NEXT_TELEMETRY_DISABLED": {␊
+          "sources": [␊
+            "general"␊
+          ],␊
+          "value": "1"␊
+        },␊
+        "PULL_REQUEST": {␊
+          "sources": [␊
+            "general"␊
+          ],␊
+          "value": "false"␊
+        }␊
+      },␊
+      "siteInfo": {}␊
+    }`
+
 ## Some properties can be capitalized
 
 > Snapshot 1
diff --git a/packages/config/tests/normalize/snapshots/tests.js.snap b/packages/config/tests/normalize/snapshots/tests.js.snap
index 4cdeb2e5e3..c743166561 100644
Binary files a/packages/config/tests/normalize/snapshots/tests.js.snap and b/packages/config/tests/normalize/snapshots/tests.js.snap differ
diff --git a/packages/config/tests/normalize/tests.js b/packages/config/tests/normalize/tests.js
index 0452209553..b744589912 100644
--- a/packages/config/tests/normalize/tests.js
+++ b/packages/config/tests/normalize/tests.js
@@ -53,10 +53,14 @@ test('Add build.commandOrigin ui if it came from defaultConfig', async (t) => {
   await runFixture(t, 'empty', { flags: { defaultConfig } })
 })
 
-test('Assign default functions if build.functions is not defined', async (t) => {
+test('Assign default functions if build.functions is not defined and default directory exists', async (t) => {
   await runFixture(t, 'default_functions_not_defined')
 })
 
+test('Does not assign default functions if default functions directory does not exist', async (t) => {
+  await runFixture(t, 'default_functions_not_defined_directory_not_found')
+})
+
 test('Does not assign default functions if build.functions is defined', async (t) => {
   await runFixture(t, 'default_functions_defined')
 })
diff --git a/packages/config/tests/validate/snapshots/tests.js.snap b/packages/config/tests/validate/snapshots/tests.js.snap
index a748f111d6..01e38efc71 100644
Binary files a/packages/config/tests/validate/snapshots/tests.js.snap and b/packages/config/tests/validate/snapshots/tests.js.snap differ