diff --git a/homeassistant/config.py b/homeassistant/config.py
index 9465025cfd2..7e8bcec08a5 100644
--- a/homeassistant/config.py
+++ b/homeassistant/config.py
@@ -1,7 +1,7 @@
 """Module to help with parsing and generating configuration files."""
 from collections import OrderedDict
 # pylint: disable=no-name-in-module
-from distutils.version import LooseVersion  # pylint: disable=import-error
+from distutils.version import StrictVersion  # pylint: disable=import-error
 import logging
 import os
 import re
@@ -31,6 +31,7 @@ from homeassistant.loader import (
     Integration, async_get_integration, IntegrationNotFound
 )
 from homeassistant.util.yaml import load_yaml, SECRET_YAML
+from homeassistant.util.package import is_docker_env
 import homeassistant.helpers.config_validation as cv
 from homeassistant.util.unit_system import IMPERIAL_SYSTEM, METRIC_SYSTEM
 from homeassistant.helpers.entity_values import EntityValues
@@ -333,13 +334,15 @@ def process_ha_config_upgrade(hass: HomeAssistant) -> None:
     _LOGGER.info("Upgrading configuration directory from %s to %s",
                  conf_version, __version__)
 
-    if LooseVersion(conf_version) < LooseVersion('0.50'):
+    version_obj = StrictVersion(conf_version)
+
+    if version_obj < StrictVersion('0.50'):
         # 0.50 introduced persistent deps dir.
         lib_path = hass.config.path('deps')
         if os.path.isdir(lib_path):
             shutil.rmtree(lib_path)
 
-    if LooseVersion(conf_version) < LooseVersion('0.92'):
+    if version_obj < StrictVersion('0.92'):
         # 0.92 moved google/tts.py to google_translate/tts.py
         config_path = find_config_file(hass.config.config_dir)
         assert config_path is not None
@@ -357,6 +360,13 @@ def process_ha_config_upgrade(hass: HomeAssistant) -> None:
                 _LOGGER.exception("Migrating to google_translate tts failed")
                 pass
 
+    if version_obj < StrictVersion('0.94.0b6') and is_docker_env():
+        # In 0.94 we no longer install packages inside the deps folder when
+        # running inside a Docker container.
+        lib_path = hass.config.path('deps')
+        if os.path.isdir(lib_path):
+            shutil.rmtree(lib_path)
+
     with open(version_path, 'wt') as outp:
         outp.write(__version__)
 
diff --git a/tests/test_config.py b/tests/test_config.py
index a42fc3b809c..8e983c673c5 100644
--- a/tests/test_config.py
+++ b/tests/test_config.py
@@ -256,7 +256,8 @@ async def test_entity_customization(hass):
 
 @mock.patch('homeassistant.config.shutil')
 @mock.patch('homeassistant.config.os')
-def test_remove_lib_on_upgrade(mock_os, mock_shutil, hass):
+@mock.patch('homeassistant.config.is_docker_env', return_value=False)
+def test_remove_lib_on_upgrade(mock_docker, mock_os, mock_shutil, hass):
     """Test removal of library on upgrade from before 0.50."""
     ha_version = '0.49.0'
     mock_os.path.isdir = mock.Mock(return_value=True)
@@ -275,6 +276,28 @@ def test_remove_lib_on_upgrade(mock_os, mock_shutil, hass):
         assert mock_shutil.rmtree.call_args == mock.call(hass_path)
 
 
+@mock.patch('homeassistant.config.shutil')
+@mock.patch('homeassistant.config.os')
+@mock.patch('homeassistant.config.is_docker_env', return_value=True)
+def test_remove_lib_on_upgrade_94(mock_docker, mock_os, mock_shutil, hass):
+    """Test removal of library on upgrade from before 0.94 and in Docker."""
+    ha_version = '0.94.0b5'
+    mock_os.path.isdir = mock.Mock(return_value=True)
+    mock_open = mock.mock_open()
+    with mock.patch('homeassistant.config.open', mock_open, create=True):
+        opened_file = mock_open.return_value
+        # pylint: disable=no-member
+        opened_file.readline.return_value = ha_version
+        hass.config.path = mock.Mock()
+        config_util.process_ha_config_upgrade(hass)
+        hass_path = hass.config.path.return_value
+
+        assert mock_os.path.isdir.call_count == 1
+        assert mock_os.path.isdir.call_args == mock.call(hass_path)
+        assert mock_shutil.rmtree.call_count == 1
+        assert mock_shutil.rmtree.call_args == mock.call(hass_path)
+
+
 def test_process_config_upgrade(hass):
     """Test update of version on upgrade."""
     ha_version = '0.92.0'