diff --git a/sdk/identity/identity/test/manual-integration/AzureFunctions/IdentityTest/local.settings.json b/sdk/identity/identity/test/manual-integration/AzureFunctions/IdentityTest/local.settings.json
new file mode 100644
index 000000000000..38d474728073
--- /dev/null
+++ b/sdk/identity/identity/test/manual-integration/AzureFunctions/IdentityTest/local.settings.json
@@ -0,0 +1,9 @@
+{
+  "IsEncrypted": false,
+  "Values": {
+    "FUNCTIONS_WORKER_RUNTIME": "node",
+    "AzureWebJobsStorage": "UseDevelopmentStorage=true",
+    "KEYVAULT_URI" :"https://kaghiya-test-identity.vault.azure.net/",
+    "AZURE_LOG_LEVEL": "verbose"
+  }
+}
diff --git a/sdk/template/template/package.json b/sdk/template/template/package.json
index 23761002ff79..a8e1c3883559 100644
--- a/sdk/template/template/package.json
+++ b/sdk/template/template/package.json
@@ -90,7 +90,7 @@
   "devDependencies": {
     "@azure/dev-tool": "^1.0.0",
     "@azure/eslint-plugin-azure-sdk": "^3.0.0",
-    "@azure/identity": "~1.3.0",
+    "@azure/identity": "2.0.0-beta.3",
     "@azure/test-utils-recorder": "^1.0.0",
     "@microsoft/api-extractor": "7.7.11",
     "@types/chai": "^4.1.6",