setuptools troubles -- excluding packages, including data files

I was trying everything and nothing seemed to work, until I deleted the build directory (after seeing another answer mentioning *.egg-info/ directory) and it finally worked. python setup.py clean --all should also do the job.

You should create a new file called MANIFEST.in in the root level of your package, then follow these instructions:

1. To control which files end up in your tar file, create a new file called MANIFEST.in in the root level of your package. For example, you can exclude whole directories from your distribution, using recursive-exclude in the MANIFEST.in file. In your case, you need your MANIFEST.in file to contain:

   recursive-exclude tests *
   

2. It's not common to include README and other files in the site-packages directory, but if you really want to, then go inside package1 and create symbolic links to the files you want to include:

   cd package1
   ln -s ../LICENSE
   ln -s ../README.md
   ln -s ../RELEASE
   

   Then change the following line in your setup.py:

   package_data = {
       '': ['LICENSE', 'README.md', 'RELEASE']
   

   to:

   package_data = {
       'package1': ['LICENSE', 'README.md', 'RELEASE']
   

find_packages uses fnmatchcase for its exclude filtering. You can test if your exclusion pattern matches a package name as follows:

>>> from fnmatch import fnmatchcase
>>> fnmatchcase('my.package.name.tests', 'tests')
False

Assuming all the tests in your project live in package names ending in tests or subpackages of those packages, the following should suffice to exclude all the test code:

setup(
    name='package1',
    version='1.1',
    packages=find_packages(exclude=['tests', '*.tests', '*.tests.*']),    
)

To also exclude the tests folder from source distributions, add the following to MANIFEST.in:

recursive-exclude tests *