diff --git a/buildtests/relimp2/__init__.py b/buildtests/relimp2/__init__.py
new file mode 100644
index 0000000..e69de29
diff --git a/buildtests/relimp2/bar/__init__.py b/buildtests/relimp2/bar/__init__.py
new file mode 100644
index 0000000..e943251
--- /dev/null
+++ b/buildtests/relimp2/bar/__init__.py
@@ -0,0 +1 @@
+from .baz import *
diff --git a/buildtests/relimp2/bar/bar2/__init__.py b/buildtests/relimp2/bar/bar2/__init__.py
new file mode 100644
index 0000000..28744f6
--- /dev/null
+++ b/buildtests/relimp2/bar/bar2/__init__.py
@@ -0,0 +1 @@
+from ..baz import *
diff --git a/buildtests/relimp2/bar/baz.py b/buildtests/relimp2/bar/baz.py
new file mode 100644
index 0000000..eadffc4
--- /dev/null
+++ b/buildtests/relimp2/bar/baz.py
@@ -0,0 +1,2 @@
+def say_hello_please():
+    print "Hello World!"
\ No newline at end of file
diff --git a/buildtests/test-relative-import2.py b/buildtests/test-relative-import2.py
new file mode 100644
index 0000000..eebb9ca
--- /dev/null
+++ b/buildtests/test-relative-import2.py
@@ -0,0 +1,5 @@
+import relimp2.bar
+import relimp2.bar.bar2
+
+relimp2.bar.say_hello_please()
+relimp2.bar.bar2.say_hello_please()
diff --git a/buildtests/test-relative-import2.spec b/buildtests/test-relative-import2.spec
new file mode 100644
index 0000000..7ca90f2
--- /dev/null
+++ b/buildtests/test-relative-import2.spec
@@ -0,0 +1,17 @@
+# -*- mode: python -*-
+
+__testname__ = 'test-relative-import2'
+
+a = Analysis([os.path.join(HOMEPATH,'support/_mountzlib.py'),
+              __testname__ + '.py'],
+             )
+pyz = PYZ(a.pure)
+exe = EXE(pyz,
+          a.scripts,
+          a.binaries,
+          a.zipfiles,
+          name = os.path.join('dist', __testname__, __testname__ +'.exe'),
+          debug=False,
+          strip=False,
+          upx=False,
+          console=1 )
diff --git a/iu.py b/iu.py
index 9e98dc0..fa92434 100644
--- a/iu.py
+++ b/iu.py
@@ -391,6 +391,7 @@ class ImportManager:
             contexts = [None]
         else: # level != 0
             importernm = globals.get('__name__', '')
+            ispkg = hasattr(_sys_modules_get(importernm), '__path__')
             debug('importernm %s' % importernm)
             if level < 0:
                 # behaviour up to Python 2.4 (and default in Python 2.5)
@@ -400,11 +401,14 @@ class ImportManager:
                 # relative import, do not try absolute
                 if not importernm:
                     raise RuntimeError("Relative import requires package")
-                importernm = _string_split(importernm, '.')[:-level]
-                importernm = _string_join('.', importernm)
+                # level=1 => current package
+                # level=2 => previous package => drop 1 level
+                if level > 1:
+                    importernm = _string_split(importernm, '.')[:-level+1]
+                    importernm = _string_join('.', importernm)
                 contexts = []
             if importernm:
-                if hasattr(_sys_modules_get(importernm), '__path__'):
+                if ispkg:
                     # If you use the "from __init__ import" syntax, the package
                     # name will have a __init__ in it. We want to strip it.
                     if importernm[-len(".__init__"):] == ".__init__":
diff --git a/mf.py b/mf.py
index 24ad5a8..db16d3f 100644
--- a/mf.py
+++ b/mf.py
@@ -490,12 +490,17 @@ class ImportTracker:
             contexts = [None]
         elif level > 0:
             # relative import, do not try absolute
-            contexts = [string.join(string.split(importernm, '.')[:-level], '.')]
+            if self.ispackage(importernm):
+                level -= 1
+            if level > 0:
+                importernm = string.join(string.split(importernm, '.')[:-level], ".")
+            contexts = [importernm]
             importernm = None
 
         _all = None
 
         assert contexts
+
         # so contexts is [pkgnm, None] or just [None]
         if nmparts[-1] == '*':
             del nmparts[-1]