diff --git a/CHANGELOG.md b/CHANGELOG.md
index 11d11bc..0c4b144 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -6,6 +6,12 @@ and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0
 
 ## [Unreleased]
 
+### Fixed
+- Removed debug print statements in `pybricksdev.compile.compile_multi_file()`.
+- Fixed `__init__.py` files in packages not being included when compiling multi-file projects ([pybricksdev#131]).
+
+[pybricksdev#131]: https://github.com/pybricks/pybricksdev/issues/131
+
 ## [2.3.1] - 2026-01-18
 
 ### Changed
diff --git a/pybricksdev/compile.py b/pybricksdev/compile.py
index 339f086..78eaf5f 100644
--- a/pybricksdev/compile.py
+++ b/pybricksdev/compile.py
@@ -180,10 +180,20 @@ async def _compile_module_and_get_imports(
     """
     with TemporaryDirectory() as temp_dir:
         module_path = os.path.join(*module_name.split(".")) + ".py"
+        package_path = os.path.join(*module_name.split("."), "__init__.py")
 
         # TODO: check for pre-compiled .mpy file first?
 
-        mpy = await compile_file(proj_dir, module_path, abi)
+        if os.path.exists(os.path.join(proj_dir, module_path)):
+            src_path = module_path
+        elif os.path.exists(os.path.join(proj_dir, package_path)):
+            src_path = package_path
+        else:
+            raise FileNotFoundError(
+                f"Module {module_name} not found. Searched for {module_path} and {package_path}."
+            )
+
+        mpy = await compile_file(proj_dir, src_path, abi)
 
         mpy_path = os.path.join(temp_dir, TMP_MPY_SCRIPT)
 
@@ -251,9 +261,6 @@ async def _compile_multi_file_with_mpy_tool(
         parts.append(name.encode() + b"\x00")
         parts.append(mpy)
 
-    print(imported_modules)
-    print(not_found_modules)
-
     return b"".join(parts)
 
 
diff --git a/tests/test_compile.py b/tests/test_compile.py
index 95efa35..8740fc9 100644
--- a/tests/test_compile.py
+++ b/tests/test_compile.py
@@ -1,5 +1,5 @@
 # SPDX-License-Identifier: MIT
-# Copyright (c) 2022 The Pybricks Authors
+# Copyright (c) 2022-2026 The Pybricks Authors
 
 
 import contextlib
@@ -7,6 +7,7 @@
 import struct
 import sys
 from tempfile import TemporaryDirectory
+from typing import Any
 
 import pytest
 
@@ -16,18 +17,18 @@
 if sys.version_info < (3, 11):
     from contextlib import AbstractContextManager
 
-    class chdir(AbstractContextManager):
+    class chdir(AbstractContextManager[None]):
         """Non thread-safe context manager to change the current working directory."""
 
-        def __init__(self, path):
+        def __init__(self, path: str) -> None:
             self.path = path
-            self._old_cwd = []
+            self._old_cwd: list[str] = []
 
-        def __enter__(self):
+        def __enter__(self) -> None:
             self._old_cwd.append(os.getcwd())
             os.chdir(self.path)
 
-        def __exit__(self, *excinfo):
+        def __exit__(self, *excinfo: Any) -> None:
             os.chdir(self._old_cwd.pop())
 
     setattr(contextlib, "chdir", chdir)
@@ -73,6 +74,8 @@ async def test_compile_multi_file(abi: int):
                     "import test1\n",
                     "from test2 import thing2\n",
                     "from nested.test3 import thing3\n",
+                    "from test4 import thing4\n",
+                    "from nested.test5 import thing5\n",
                 ]
             )
 
@@ -100,6 +103,24 @@ async def test_compile_multi_file(abi: int):
         ) as f3:
             f3.write("thing3 = 'thing3'\n")
 
+        # test4 and test5 are to test package modules with non-empty __init__.py
+
+        os.mkdir("test4")
+
+        with open(
+            os.path.join(temp_dir, "test4", "__init__.py"), "w", encoding="utf-8"
+        ) as f4:
+            f4.write("thing4 = 'thing4'\n")
+
+        os.mkdir(os.path.join("nested", "test5"))
+
+        with open(
+            os.path.join(temp_dir, "nested", "test5", "__init__.py"),
+            "w",
+            encoding="utf-8",
+        ) as f5:
+            f5.write("thing5 = 'thing5'\n")
+
         multi_mpy = await compile_multi_file("test.py", abi)
         pos = 0
 
@@ -130,13 +151,21 @@ def unpack_mpy(data: bytes) -> tuple[bytes, bytes]:
         names.add(name2.decode())
         name3, mpy3 = unpack_mpy(multi_mpy)
         names.add(name3.decode())
+
         if uses_module_finder:
             # ModuleFinder requires __init__.py.
             name4, mpy4 = unpack_mpy(multi_mpy)
             names.add(name4.decode())
+
         name5, mpy5 = unpack_mpy(multi_mpy)
         names.add(name5.decode())
 
+        name6, mpy6 = unpack_mpy(multi_mpy)
+        names.add(name6.decode())
+
+        name7, mpy7 = unpack_mpy(multi_mpy)
+        names.add(name7.decode())
+
         assert pos == len(multi_mpy)
 
         # It is important that the main module is first.
@@ -150,9 +179,9 @@ def unpack_mpy(data: bytes) -> tuple[bytes, bytes]:
         assert "nested.test3" in names
 
         if uses_module_finder:
-            assert len(names) == 4
+            assert len(names) == 6
         else:
-            assert len(names) == 3
+            assert len(names) == 5
 
         def check_mpy(mpy: bytes) -> None:
             magic, abi_ver, flags, int_bits = struct.unpack_from("<BBBB", mpy)
@@ -168,3 +197,5 @@ def check_mpy(mpy: bytes) -> None:
         if uses_module_finder:
             check_mpy(mpy4)  # pyright: ignore[reportPossiblyUnboundVariable]
         check_mpy(mpy5)
+        check_mpy(mpy6)
+        check_mpy(mpy7)