Initialize a package.json file in the root folder of your project:

npm init -y

Then install any npm package you need, for example:

npm install axios

A node_modules folder and a package-lock.json file will be created. Commit both (yes, you need to add the node_modules content to the repository you want to deploy, try to keep your dependencies as few as possible)

That’s it. You can now access those npm packages using require() in your Netlify Functions.