In this case py.test fails to collect tests because import of modules fails. The failure comes in following steps:

1. I'm on Windows, py.test is a part of Anaconda scientific installation. Cannot use pip for upgrades.
2. My current folder is D:\mwe-pytest-in-package\setting_1
3. Run py.test
4. Getting the following:

>py.test
============================= test session starts =============================
platform win32 -- Python 3.4.3 -- py-1.4.26 -- pytest-2.6.4
collected 0 items / 1 errors

=================================== ERRORS ====================================
________________________ ERROR collecting test_foo.py _________________________
test_foo.py:1: in <module>
    from code import foo
E   ImportError: cannot import name 'foo'
=========================== 1 error in 0.08 seconds ===========================

• For some reason py.test fails to import a module code while colleting a test test_foo.py.
• Googling and StackOverflow were not much help yet.
• Note that python code.py and python test_foo.py run without error.

##Solution Adding current working directory to PYTHONPATH helped starting py.test:

```set "PYTHONPATH=D:\mwe-pytest-in-package\setting_1"``

Remaining questions:

• other way of making py.test do the imports?
• why python interpreter does imports modules OK and py.test doesn't?

##Answer

• One problem I found was that you're importing the module code if you type in another shell the following, there's actually a module called code in the standard library:

  C:\Users\Gabriele\Anaconda3\lib\code.py

• One solution would be for example to rename the module to something else, for example code1.py, or hide it behind a package, so you can access it by its full name mypackage.code:

  mypackage/
    __init__.py
    code.py

• As for why is this happening with pytest and not with calling the module directly has to do with absolute imports (import something). Apparently the "import priority" work differently when run as-a-script, and by setting the PYTHONPATH you're making the priority higher for the modules in the current directory.

You can test in the setting_2 directory if this is working properly.