diff --git a/.gitignore b/.gitignore
index e0a583ec..3ab04e2f 100644
--- a/.gitignore
+++ b/.gitignore
@@ -93,6 +93,7 @@ ENV/
 env.bak/
 venv.bak/
 *.vscode
+condaenv.*
 
 # Spyder project settings
 .spyderproject
diff --git a/diabetes_regression/ci_dependencies.yml b/diabetes_regression/ci_dependencies.yml
new file mode 100644
index 00000000..a61731c4
--- /dev/null
+++ b/diabetes_regression/ci_dependencies.yml
@@ -0,0 +1,28 @@
+name: mlopspython_ci
+
+dependencies:
+
+  # The python interpreter version.
+- python=3.7.5
+
+- r=3.6.0
+- r-essentials=3.6.0
+- numpy=1.18.1
+- pandas=1.0.0
+- scikit-learn=0.22.1
+
+- pip=20.0.2
+- pip:
+
+  # dependencies shared with other environment .yml files.
+  - azureml-sdk==1.0.79
+
+  # Additional pip dependencies for the CI environment.
+  - pytest==5.3.1
+  - pytest-cov==2.8.1
+  - requests==2.22.0
+  - python-dotenv==0.10.3
+  - flake8==3.7.9
+  - flake8_formatter_junit_xml==0.0.6
+  - azure-cli==2.0.77
+  - tox==3.14.3
diff --git a/diabetes_regression/scoring/inference_config.yml b/diabetes_regression/scoring/inference_config.yml
index 3f65cf33..42947da8 100644
--- a/diabetes_regression/scoring/inference_config.yml
+++ b/diabetes_regression/scoring/inference_config.yml
@@ -1,9 +1,9 @@
 entryScript: score.py
 runtime: python
-condaFile: conda_dependencies.yml
+condaFile: ../scoring_dependencies.yml
 extraDockerfileSteps:
 schemaFile:
 sourceDirectory:
 enableGpu: False
 baseImage:
-baseImageRegistry:
\ No newline at end of file
+baseImageRegistry:
diff --git a/diabetes_regression/scoring/conda_dependencies.yml b/diabetes_regression/scoring_dependencies.yml
similarity index 71%
rename from diabetes_regression/scoring/conda_dependencies.yml
rename to diabetes_regression/scoring_dependencies.yml
index c97a2722..26ce3622 100644
--- a/diabetes_regression/scoring/conda_dependencies.yml
+++ b/diabetes_regression/scoring_dependencies.yml
@@ -14,24 +14,23 @@
 # This directive is stored in a comment to preserve the Conda file structure.
 # [AzureMlVersion] = 2
 
-name: project_environment
+name: diabetes_scoring
+
 dependencies:
+
   # The python interpreter version.
-  # Currently Azure ML Workbench only supports 3.5.2 and later.
 - python=3.7.5
+
   # Required by azureml-defaults, installed separately through Conda to
   # get a prebuilt version and not require build tools for the install.
 - psutil=5.6 #latest
 
+- numpy=1.18.1
+- pandas=1.0.0
+- scikit-learn=0.22.1
+
+- pip=20.0.2
 - pip:
-    # Required packages for AzureML execution, history, and data preparation.
-  - azureml-model-management-sdk==1.0.1b6.post1
-  - azureml-sdk==1.0.74
-  - scipy==1.3.1
-  - scikit-learn==0.22
-  - pandas==0.25.3
-  - numpy==1.17.3
-  - joblib==0.14.0
-  - gunicorn==19.9.0 
-  - flask==1.1.1
-  - inference-schema[numpy-support]
+  # You must list azureml-defaults as a pip dependency
+  - azureml-defaults==1.0.85
+  - inference-schema[numpy-support]==1.0.1
diff --git a/diabetes_regression/training_dependencies.yml b/diabetes_regression/training_dependencies.yml
new file mode 100644
index 00000000..4d7a42a7
--- /dev/null
+++ b/diabetes_regression/training_dependencies.yml
@@ -0,0 +1,17 @@
+name: diabetes_training
+
+dependencies:
+
+  # The python interpreter version.
+- python=3.7.5
+
+- numpy=1.18.1
+- pandas=1.0.0
+- scikit-learn=0.22.1
+#- r-essentials
+#- tensorflow
+#- keras
+
+- pip=20.0.2
+- pip:
+  - azureml-core==1.0.79
diff --git a/docs/code_description.md b/docs/code_description.md
index 5f323ad6..d69a6f30 100644
--- a/docs/code_description.md
+++ b/docs/code_description.md
@@ -2,9 +2,7 @@
 
 ### Environment Setup
 
-- `environment_setup/requirements.txt` : It consists of a list of python packages which are needed by the train.py to run successfully on host agent (locally).
-
-- `environment_setup/install_requirements.sh` : This script prepares the python environment i.e. install the Azure ML SDK and the packages specified in requirements.txt
+- `environment_setup/install_requirements.sh` : This script prepares a local conda environment i.e. install the Azure ML SDK and the packages specified in environment definitions.
 
 - `environment_setup/iac-*.yml, arm-templates` : Infrastructure as Code piplines to create and delete required resources along with corresponding arm-templates.
 
@@ -27,6 +25,12 @@
 - `ml_service/pipelines/diabetes_regression_verify_train_pipeline.py` : determines whether the evaluate_model.py step of the training pipeline registered a new model.
 - `ml_service/util` : contains common utility functions used to build and publish an ML training pipeline.
 
+### Environment Definitions
+
+- `diabetes_regression/training_dependencies.yml` : Conda environment definition for the training environment (Docker image in which train.py is run).
+- `diabetes_regression/scoring_dependencies.yml` : Conda environment definition for the scoring environment (Docker image in which score.py is run).
+- `diabetes_regression/ci_dependencies.yml` : Conda environment definition for the CI environment.
+
 ### Code
 
 - `diabetes_regression/training/train.py` : a training step of an ML training pipeline.
@@ -39,5 +43,4 @@
 
 ### Scoring
 - `diabetes_regression/scoring/score.py` : a scoring script which is about to be packed into a Docker Image along with a model while being deployed to QA/Prod environment.
-- `diabetes_regression/scoring/conda_dependencies.yml` : contains a list of dependencies required by score.py to be installed in a deployable Docker Image 
 - `diabetes_regression/scoring/inference_config.yml`, deployment_config_aci.yml, deployment_config_aks.yml : configuration files for the [AML Model Deploy](https://marketplace.visualstudio.com/items?itemName=ms-air-aiagility.private-vss-services-azureml&ssr=false#overview) pipeline task for ACI and AKS deployment targets.
diff --git a/docs/getting_started.md b/docs/getting_started.md
index bbd20506..8b3167e4 100644
--- a/docs/getting_started.md
+++ b/docs/getting_started.md
@@ -171,7 +171,13 @@ Great, you now have the build pipeline set up which automatically triggers every
 
   **Note:** The build pipeline also supports building and publishing ML
 pipelines using R to train a model. This is enabled
-by changing the `build-train-script` pipeline variable to either `diabetes_regression_build_train_pipeline_with_r.py`, or `diabetes_regression_build_train_pipeline_with_r_on_dbricks.py`. For pipeline training a model with R on Databricks you'll need
+by changing the `build-train-script` pipeline variable to either of:
+* `diabetes_regression_build_train_pipeline_with_r.py` to train a model
+with R on Azure ML Compute. You will also need to add the
+`r-essentials` Conda packages into `diabetes_regression/scoring_dependencies.yml`
+and `diabetes_regression/training_dependencies.yml`. 
+* `diabetes_regression_build_train_pipeline_with_r_on_dbricks.py`
+to train a model with R on Databricks. You will need
 to manually create a Databricks cluster and attach it to the ML Workspace as a
 compute (Values DB_CLUSTER_ID and DATABRICKS_COMPUTE_NAME variables should be
 specified).
@@ -243,6 +249,7 @@ Make sure your webapp has the credentials to pull the image from the Azure Conta
 * You should edit the pipeline definition to remove unused stages. For example, if you are deploying to ACI and AKS, you should delete the unused `Deploy_Webapp` stage.
 * The sample pipeline generates a random value for a model hyperparameter (ridge regression [*alpha*](https://scikit-learn.org/stable/modules/generated/sklearn.linear_model.Ridge.html)) to generate 'interesting' charts when testing the sample. In a real application you should use fixed hyperparameter values. You can [tune hyperparameter values using Azure ML](https://docs.microsoft.com/en-us/azure/machine-learning/service/how-to-tune-hyperparameters), and manage their values in Azure DevOps Variable Groups.
 * You may wish to enable [manual approvals](https://docs.microsoft.com/en-us/azure/devops/pipelines/process/approvals) before the deployment stages.
+* You can install additional Conda or pip packages by modifying the YAML environment configurations under the `diabetes_regression` directory. Make sure to use fixed version numbers for all packages to ensure reproducibility, and use the same versions across environments.
 * You can explore aspects of model observability in the solution, such as:
   * **Logging**: navigate to the Application Insights instance linked to the Azure ML Portal,
     then to the Logs (Analytics) pane. The following sample query correlates HTTP requests with custom logs
diff --git a/environment_setup/Dockerfile b/environment_setup/Dockerfile
index 5e7b7581..4137967a 100644
--- a/environment_setup/Dockerfile
+++ b/environment_setup/Dockerfile
@@ -4,11 +4,16 @@ LABEL org.label-schema.vendor = "Microsoft" \
       org.label-schema.url = "https://hub.docker.com/r/microsoft/mlopspython" \
       org.label-schema.vcs-url = "https://github.com/microsoft/MLOpsPython"
 
-       
+COPY diabetes_regression/ci_dependencies.yml /setup/
 
-COPY environment_setup/requirements.txt  /setup/
-	
-RUN apt-get update && apt-get install gcc -y && pip install --upgrade -r /setup/requirements.txt && \ 
-    conda install -c r r-essentials
+RUN conda env create -f /setup/ci_dependencies.yml
 
-CMD ["python"]
\ No newline at end of file
+# activate environment
+ENV PATH /usr/local/envs/mlopspython_ci/bin:$PATH
+RUN /bin/bash -c "source activate mlopspython_ci"
+
+# Verify conda installation.
+# This serves as workaround for https://github.com/conda/conda/issues/8537 (conda env create doesn't fail
+# if pip installation fails, for example due to a wrong package version).
+# The `az` command is not available if pip has not run (and installed azure-cli).
+RUN az --version
diff --git a/environment_setup/install_requirements.sh b/environment_setup/install_requirements.sh
old mode 100644
new mode 100755
index 930514a6..989e8b1e
--- a/environment_setup/install_requirements.sh
+++ b/environment_setup/install_requirements.sh
@@ -24,6 +24,8 @@
 # ARISING IN ANY WAY OUT OF THE USE OF THE SOFTWARE CODE, EVEN IF ADVISED OF THE
 # POSSIBILITY OF SUCH DAMAGE.
 
+set -eux
 
-python --version
-pip install -r requirements.txt
\ No newline at end of file
+conda env create -f diabetes_regression/ci_dependencies.yml
+
+conda activate mlopspython_ci
diff --git a/environment_setup/requirements.txt b/environment_setup/requirements.txt
deleted file mode 100644
index babb1ddc..00000000
--- a/environment_setup/requirements.txt
+++ /dev/null
@@ -1,12 +0,0 @@
-pytest>=5.3
-pytest-cov>=2.8.1
-requests>=2.22
-numpy>=1.17
-pandas>=0.25
-scikit-learn>=0.21.3
-azureml-sdk>=1.0
-python-dotenv>=0.10.3
-flake8>=3.7
-flake8_formatter_junit_xml>=0.0.6
-tox>=3.14.3
-azure-cli==2.0.76
diff --git a/ml_service/pipelines/diabetes_regression_build_train_pipeline.py b/ml_service/pipelines/diabetes_regression_build_train_pipeline.py
index 66913420..b127d9ee 100644
--- a/ml_service/pipelines/diabetes_regression_build_train_pipeline.py
+++ b/ml_service/pipelines/diabetes_regression_build_train_pipeline.py
@@ -28,14 +28,10 @@ def main():
         print("aml_compute:")
         print(aml_compute)
 
-    run_config = RunConfiguration(conda_dependencies=CondaDependencies.create(
-        conda_packages=['numpy', 'pandas',
-                        'scikit-learn', 'tensorflow', 'keras'],
-        pip_packages=['azure', 'azureml-core',
-                      'azure-storage',
-                      'azure-storage-blob',
-                      'azureml-dataprep'])
-    )
+    # Create a run configuration environment
+    conda_deps_file = "diabetes_regression/training_dependencies.yml"
+    conda_deps = CondaDependencies(conda_deps_file)
+    run_config = RunConfiguration(conda_dependencies=conda_deps)
     run_config.environment.docker.enabled = True
     config_envvar = {}
     if (e.collection_uri is not None and e.teamproject_name is not None):
diff --git a/ml_service/pipelines/diabetes_regression_build_train_pipeline_with_r.py b/ml_service/pipelines/diabetes_regression_build_train_pipeline_with_r.py
index 25537424..1c383d50 100644
--- a/ml_service/pipelines/diabetes_regression_build_train_pipeline_with_r.py
+++ b/ml_service/pipelines/diabetes_regression_build_train_pipeline_with_r.py
@@ -26,15 +26,11 @@ def main():
         print("aml_compute:")
         print(aml_compute)
 
-    run_config = RunConfiguration(conda_dependencies=CondaDependencies.create(
-        conda_packages=['numpy', 'pandas',
-                        'scikit-learn', 'tensorflow', 'keras'],
-        pip_packages=['azure', 'azureml-core',
-                      'azure-storage',
-                      'azure-storage-blob'])
-    )
+    # Create a run configuration environment
+    conda_deps_file = "diabetes_regression/training_dependencies.yml"
+    conda_deps = CondaDependencies(conda_deps_file)
+    run_config = RunConfiguration(conda_dependencies=conda_deps)
     run_config.environment.docker.enabled = True
-    run_config.environment.docker.base_image = "mcr.microsoft.com/mlops/python"
 
     train_step = PythonScriptStep(
         name="Train Model",