diff --git a/CHANGELOG b/CHANGELOG
index 770198e7d..5d9d29b0b 100644
--- a/CHANGELOG
+++ b/CHANGELOG
@@ -1,7 +1,8 @@
 Changes between 1.2.1 and 1.2.0
 =====================================
 
-- refined usage and options for "py.cleanup":
+- refined usage and options for "py.cleanup"::
+
     py.cleanup     # remove "*.pyc" and "*$py.class" (jython) files
     py.cleanup -e .swp -e .cache # also remove files with these extensions
     py.cleanup -s  # remove "build" and "dist" directory next to setup.py files
@@ -16,8 +17,8 @@ Changes between 1.2.1 and 1.2.0
 - display a short and concise traceback if a funcarg lookup fails 
 
 - early-load "conftest.py" files in non-dot first-level sub directories. 
-  allows to conveniently keep and access test-related options without 
-  having to put a conftest.py into the package root dir.
+  allows to conveniently keep and access test-related options in a ``test`` 
+  subdir and still add command line options. 
 
 - fix issue67: new super-short traceback-printing option: "--tb=line" will print a single line for each failing (python) test indicating its filename, lineno and the failure value
 
diff --git a/MANIFEST.in b/MANIFEST.in
index f35fa3367..60cbe6bcb 100644
--- a/MANIFEST.in
+++ b/MANIFEST.in
@@ -10,7 +10,7 @@ graft bin
 graft testing
 #exclude *.orig 
 #exclude *.rej 
-exclude .hginore
+#exclude .hginore
 #exclude *.pyc
 #recursive-exclude testing *.pyc *.orig *.rej *$py.class
 #prune .pyc
diff --git a/doc/announce/release-1.2.1.txt b/doc/announce/release-1.2.1.txt
new file mode 100644
index 000000000..9c543614b
--- /dev/null
+++ b/doc/announce/release-1.2.1.txt
@@ -0,0 +1,66 @@
+py.test/pylib 1.2.1: little fixes and improvements 
+--------------------------------------------------------------------------------
+
+py.test is an advanced automated testing tool working with
+Python2, Python3 and Jython versions on all major operating
+systems.  It has a simple plugin architecture and can run many 
+existing common Python test suites without modification.  It offers 
+some unique features not found in other testing tools.  
+See http://pytest.org for more info.
+
+py.test 1.2.1 brings bug fixes and some new options and abilities triggered 
+by user feedback:
+
+* --funcargs [testpath]  will show available builtin- and project funcargs.
+* display a short and concise traceback if funcarg lookup fails.
+* early-load "conftest.py" files in non-dot first-level sub directories. 
+* --tb=line will print a single line for each failing test (issue67)
+* py.cleanup has a number of new options, cleanups up setup.py related files
+* fix issue78: always call python-level teardown functions even if the
+  according setup failed.  
+
+For more detailed information see the changelog below. 
+
+cheers and have fun,
+
+holger 
+
+
+Changes between 1.2.1 and 1.2.0
+=====================================
+
+- refined usage and options for "py.cleanup"::
+
+    py.cleanup     # remove "*.pyc" and "*$py.class" (jython) files
+    py.cleanup -e .swp -e .cache # also remove files with these extensions
+    py.cleanup -s  # remove "build" and "dist" directory next to setup.py files
+    py.cleanup -d  # also remove empty directories 
+    py.cleanup -a  # synonym for "-s -d -e 'pip-log.txt'"
+    py.cleanup -n  # dry run, only show what would be removed
+
+- add a new option "py.test --funcargs" which shows available funcargs 
+  and their help strings (docstrings on their respective factory function) 
+  for a given test path
+
+- display a short and concise traceback if a funcarg lookup fails 
+
+- early-load "conftest.py" files in non-dot first-level sub directories. 
+  allows to conveniently keep and access test-related options in a ``test`` 
+  subdir and still add command line options. 
+
+- fix issue67: new super-short traceback-printing option: "--tb=line" will print a single line for each failing (python) test indicating its filename, lineno and the failure value
+
+- fix issue78: always call python-level teardown functions even if the
+  according setup failed.  This includes refinements for calling setup_module/class functions 
+  which will now only be called once instead of the previous behaviour where they'd be called
+  multiple times if they raise an exception (including a Skipped exception).  Any exception
+  will be re-corded and associated with all tests in the according module/class scope.
+
+- fix issue63: assume <40 columns to be a bogus terminal width, default to 80
+
+- fix pdb debugging to be in the correct frame on raises-related errors 
+
+- update apipkg.py to fix an issue where recursive imports might
+  unnecessarily break importing 
+
+- fix plugin links 
diff --git a/py/__init__.py b/py/__init__.py
index 3dc9232fe..c3f4c97b5 100644
--- a/py/__init__.py
+++ b/py/__init__.py
@@ -8,7 +8,7 @@ dictionary or an import path.
 
 (c) Holger Krekel and others, 2004-2010
 """
-version = "1.2.0post1"
+version = "1.2.1"
 
 __version__ = version = version or "1.2.x"
 import py.apipkg
diff --git a/setup.py b/setup.py
index 0ea4395f1..58aefd7d1 100644
--- a/setup.py
+++ b/setup.py
@@ -27,7 +27,7 @@ def main():
         name='py',
         description='py.test and pylib: rapid testing and development utils.',
         long_description = long_description,
-        version= trunk or '1.2.0post1',
+        version= trunk or '1.2.1',
         url='http://pylib.org',
         license='MIT license',
         platforms=['unix', 'linux', 'osx', 'cygwin', 'win32'],