diff --git a/CHANGELOG b/CHANGELOG
index 8aab63ce4..614169950 100644
--- a/CHANGELOG
+++ b/CHANGELOG
@@ -1,6 +1,7 @@
 Changes between 2.1.1 and [NEXT VERSION]
 ----------------------------------------
 
+- fix issue68 / packages now work with assertion rewriting
 - fix issue66: use different assertion rewriting caches when the -O option is passed
 
 Changes between 2.1.0 and 2.1.1
diff --git a/_pytest/assertion/rewrite.py b/_pytest/assertion/rewrite.py
index 8d850433b..a82871669 100644
--- a/_pytest/assertion/rewrite.py
+++ b/_pytest/assertion/rewrite.py
@@ -77,7 +77,7 @@ class AssertionRewritingHook(object):
                 # Don't know what this is.
                 return None
         else:
-            fn = os.path.join(pth, name + ".py")
+            fn = os.path.join(pth, name.rpartition(".")[2] + ".py")
         fn_pypath = py.path.local(fn)
         # Is this a test file?
         if not sess.isinitpath(fn):
diff --git a/testing/test_assertrewrite.py b/testing/test_assertrewrite.py
index 8c322c09e..bf5ea5179 100644
--- a/testing/test_assertrewrite.py
+++ b/testing/test_assertrewrite.py
@@ -340,3 +340,12 @@ def test_optimized():
         assert testdir.runpybin("py.test", tmp).ret == 0
         monkeypatch.undo()
         assert testdir.runpybin("py.test", tmp).ret == 1
+
+    def test_package(self, testdir):
+        pkg = testdir.tmpdir.join("pkg")
+        pkg.mkdir()
+        pkg.join("__init__.py").ensure()
+        pkg.join("test_blah.py").write("""
+def test_rewritten():
+    assert "@py_builtins" in globals()""")
+        assert testdir.runpytest().ret == 0