diff --git a/.changes/unreleased/Fixes-20240323-124558.yaml b/.changes/unreleased/Fixes-20240323-124558.yaml
new file mode 100644
index 00000000000..b36173325ba
--- /dev/null
+++ b/.changes/unreleased/Fixes-20240323-124558.yaml
@@ -0,0 +1,6 @@
+kind: Fixes
+body: Only create the packages-install-path / dbt_packages folder during dbt deps
+time: 2024-03-23T12:45:58.159017-06:00
+custom:
+  Author: dbeatty10
+  Issue: 6985 9584
diff --git a/core/dbt/compilation.py b/core/dbt/compilation.py
index 388713842ed..09695fc59d7 100644
--- a/core/dbt/compilation.py
+++ b/core/dbt/compilation.py
@@ -274,7 +274,6 @@ def __init__(self, config) -> None:
 
     def initialize(self):
         make_directory(self.config.project_target_path)
-        make_directory(self.config.packages_install_path)
 
     # creates a ModelContext which is converted to
     # a dict for jinja rendering of SQL
diff --git a/tests/functional/list/test_list.py b/tests/functional/list/test_list.py
index b636bf20d39..4eb8cb8e2f9 100644
--- a/tests/functional/list/test_list.py
+++ b/tests/functional/list/test_list.py
@@ -37,6 +37,13 @@ def project_config_update(self):
             },
         }
 
+    def test_packages_install_path_does_not_exist(self, project):
+        run_dbt(["list"])
+        packages_install_path = "dbt_packages"
+
+        # the packages-install-path should not be created by `dbt list`
+        assert not os.path.exists(packages_install_path)
+
     def run_dbt_ls(self, args=None, expect_pass=True):
         log_manager.stdout_console()
         full_args = ["ls"]