diff --git a/mercurial/packagescan.py b/mercurial/packagescan.py
--- a/mercurial/packagescan.py
+++ b/mercurial/packagescan.py
@@ -65,7 +65,7 @@ def scan(libpath,packagename):
     # Use the package in the build directory
     libpath = os.path.abspath(libpath)
     sys.path.insert(0,libpath)
-    packdir = os.path.join(libpath,packagename)
+    packdir = os.path.join(libpath,packagename.replace('.', '/'))
     # A normal import would not find the package in
     # the build directory. ihook is used to force the import.
     # After the package is imported the import scope for
diff --git a/setup.py b/setup.py
--- a/setup.py
+++ b/setup.py
@@ -56,7 +56,7 @@ try:
             else:
                 self.includes = self.includes.split(',')
             mercurial.packagescan.scan(self.build_lib,'mercurial')
-            mercurial.packagescan.scan(self.build_lib,'mercurial/hgweb')
+            mercurial.packagescan.scan(self.build_lib,'mercurial.hgweb')
             mercurial.packagescan.scan(self.build_lib,'hgext')
             self.includes += mercurial.packagescan.getmodules()
             build_exe.finalize_options(self)