diff --git a/command/e2etest/init_test.go b/command/e2etest/init_test.go
index cc47d3165f..9fcddbfb72 100644
--- a/command/e2etest/init_test.go
+++ b/command/e2etest/init_test.go
@@ -73,12 +73,51 @@ func TestInitProvidersInternal(t *testing.T) {
 		t.Errorf("success message is missing from output:\n%s", stdout)
 	}
 
-	if strings.Contains(stdout, "Downloading plugin for provider") {
+	if strings.Contains(stdout, "Installing registry.terraform.io/hashicorp/terraform") {
 		// Shouldn't have downloaded anything with this config, because the
 		// provider is built in.
 		t.Errorf("provider download message appeared in output:\n%s", stdout)
 	}
 
+	if strings.Contains(stdout, "Installing terraform.io/builtin/terraform") {
+		// Shouldn't have downloaded anything with this config, because the
+		// provider is built in.
+		t.Errorf("provider download message appeared in output:\n%s", stdout)
+	}
+}
+
+func TestInitProvidersVendored(t *testing.T) {
+	t.Parallel()
+
+	// This test will try to reach out to registry.terraform.io as one of the
+	// possible installation locations for
+	// registry.terraform.io/hashicorp/null, where it will find that
+	// versions do exist but will ultimately select the version that is
+	// vendored due to the version constraint.
+	skipIfCannotAccessNetwork(t)
+
+	fixturePath := filepath.Join("testdata", "vendored-provider")
+	tf := e2e.NewBinary(terraformBin, fixturePath)
+	defer tf.Close()
+
+	stdout, stderr, err := tf.Run("init")
+	if err != nil {
+		t.Errorf("unexpected error: %s", err)
+	}
+
+	if stderr != "" {
+		t.Errorf("unexpected stderr output:\n%s", stderr)
+	}
+
+	if !strings.Contains(stdout, "Terraform has been successfully initialized!") {
+		t.Errorf("success message is missing from output:\n%s", stdout)
+	}
+
+	if !strings.Contains(stdout, "- Installing registry.terraform.io/hashicorp/null v1.0.0+local") {
+		t.Errorf("provider download message is missing from output:\n%s", stdout)
+		t.Logf("(this can happen if you have a copy of the plugin in one of the global plugin search dirs)")
+	}
+
 }
 
 func TestInitProviders_pluginCache(t *testing.T) {
diff --git a/command/e2etest/testdata/vendored-provider/main.tf b/command/e2etest/testdata/vendored-provider/main.tf
new file mode 100644
index 0000000000..3cb6215378
--- /dev/null
+++ b/command/e2etest/testdata/vendored-provider/main.tf
@@ -0,0 +1,8 @@
+terraform {
+  required_providers {
+    null = {
+      source  = "hashicorp/null"
+      version = "1.0.0+local"
+    }
+  }
+}
diff --git a/command/e2etest/testdata/vendored-provider/terraform.d/plugins/registry.terraform.io/hashicorp/null/1.0.0+local/os_arch/terraform-provider-null_v1.0.0 b/command/e2etest/testdata/vendored-provider/terraform.d/plugins/registry.terraform.io/hashicorp/null/1.0.0+local/os_arch/terraform-provider-null_v1.0.0
new file mode 100644
index 0000000000..e69de29bb2
diff --git a/command/init_test.go b/command/init_test.go
index dc4ebc7859..baf26967c2 100644
--- a/command/init_test.go
+++ b/command/init_test.go
@@ -849,62 +849,6 @@ func TestInit_getProvider(t *testing.T) {
 	})
 }
 
-// make sure we can locate providers in various paths
-func TestInit_findVendoredProviders(t *testing.T) {
-	// Create a temporary working directory that is empty
-	td := tempDir(t)
-
-	configDirName := "init-get-providers"
-	copy.CopyDir(testFixturePath(configDirName), filepath.Join(td, configDirName))
-	defer os.RemoveAll(td)
-	defer testChdir(t, td)()
-
-	// An empty provider source
-	providerSource, close := newMockProviderSource(t, nil)
-	defer close()
-
-	ui := new(cli.MockUi)
-	m := Meta{
-		testingOverrides: metaOverridesForProvider(testProvider()),
-		Ui:               ui,
-		ProviderSource:   providerSource,
-	}
-
-	c := &InitCommand{
-		Meta: m,
-	}
-
-	// make our plugin paths
-	if err := os.MkdirAll(c.pluginDir(), 0755); err != nil {
-		t.Fatal(err)
-	}
-	if err := os.MkdirAll(DefaultPluginVendorDir, 0755); err != nil {
-		t.Fatal(err)
-	}
-
-	// add some dummy providers
-	// the auto plugin directory
-	exactPath := filepath.Join(c.pluginDir(), "terraform-provider-exact_v1.2.3_x4")
-	if err := ioutil.WriteFile(exactPath, []byte("test bin"), 0755); err != nil {
-		t.Fatal(err)
-	}
-	// the vendor path
-	greaterThanPath := filepath.Join(DefaultPluginVendorDir, "terraform-provider-greater-than_v2.3.4_x4")
-	if err := ioutil.WriteFile(greaterThanPath, []byte("test bin"), 0755); err != nil {
-		t.Fatal(err)
-	}
-	// Check the current directory too
-	betweenPath := filepath.Join(".", "terraform-provider-between_v2.3.4_x4")
-	if err := ioutil.WriteFile(betweenPath, []byte("test bin"), 0755); err != nil {
-		t.Fatal(err)
-	}
-
-	args := []string{configDirName}
-	if code := c.Run(args); code != 0 {
-		t.Fatalf("bad: \n%s", ui.ErrorWriter.String())
-	}
-}
-
 func TestInit_providerSource(t *testing.T) {
 	// Create a temporary working directory that is empty
 	td := tempDir(t)