I disagree. If your project ever gets packaged by a distribution, they will want to split the tests (and docs) into a separate sub-package with different packag

I disagree. If your project ever gets packaged by a distribution, they will want to split the tests (and docs) into a separate sub-package with different package requirements or even discard them altogether. This will make that job a little difficult. And not only distributions do this. There are organisations who choose to package and deploy projects inside rpms or even bash scripts. Keeping the tests separate from the code just makes things a lot clearer and easier. Tests that need to be run in production are probably functional or integration tests (Although even those should probably be run on a test system, not the actual production server). These should be separate from unit tests. Will you then have a whole tree of test subdirectories in each of your python submodules? test/unit/py, test/functional/py etc.