diff --git a/CHANGELOG.md b/CHANGELOG.md
index b755258..5ac2a3f 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -64,6 +64,11 @@
 * (gazelle) Use relative paths if possible for dependencies added through
   the use of the `resolve` directive.
 
+* (gazelle) When using `python_generation_mode file`, one `py_test` target is
+  made per test file even if a target named `__test__` or a file named
+  `__test__.py` exists in the same package. Previously in these cases there
+  would only be one test target made.
+
 Breaking changes:
 
 * (pip) `pip_install` repository rule in this release has been disabled and
diff --git a/gazelle/python/generate.go b/gazelle/python/generate.go
index 0e47ed7..25fb194 100644
--- a/gazelle/python/generate.go
+++ b/gazelle/python/generate.go
@@ -371,7 +371,8 @@
 			addModuleDependencies(deps).
 			generateImportsAttribute()
 	}
-	if hasPyTestEntryPointFile || hasPyTestEntryPointTarget || cfg.CoarseGrainedGeneration() {
+	if (hasPyTestEntryPointFile || hasPyTestEntryPointTarget || cfg.CoarseGrainedGeneration()) && !cfg.PerFileGeneration() {
+		// Create one py_test target per package
 		if hasPyTestEntryPointFile {
 			// Only add the pyTestEntrypointFilename to the pyTestFilenames if
 			// the file exists on disk.
@@ -396,7 +397,20 @@
 		pyTestFilenames.Each(func(index int, testFile interface{}) {
 			srcs := treeset.NewWith(godsutils.StringComparator, testFile)
 			pyTestTargetName := strings.TrimSuffix(filepath.Base(testFile.(string)), ".py")
-			pyTestTargets = append(pyTestTargets, newPyTestTargetBuilder(srcs, pyTestTargetName))
+			pyTestTarget := newPyTestTargetBuilder(srcs, pyTestTargetName)
+
+			if hasPyTestEntryPointTarget {
+				entrypointTarget := fmt.Sprintf(":%s", pyTestEntrypointTargetname)
+				main := fmt.Sprintf(":%s", pyTestEntrypointFilename)
+				pyTestTarget.
+					addSrc(entrypointTarget).
+					addResolvedDependency(entrypointTarget).
+					setMain(main)
+			} else if hasPyTestEntryPointFile {
+				pyTestTarget.addSrc(pyTestEntrypointFilename)
+				pyTestTarget.setMain(pyTestEntrypointFilename)
+			}
+			pyTestTargets = append(pyTestTargets, pyTestTarget)
 		})
 	}
 
diff --git a/gazelle/python/testdata/per_file/BUILD.out b/gazelle/python/testdata/per_file/BUILD.out
index 2ec825b..6deada8 100644
--- a/gazelle/python/testdata/per_file/BUILD.out
+++ b/gazelle/python/testdata/per_file/BUILD.out
@@ -1,4 +1,4 @@
-load("@rules_python//python:defs.bzl", "py_library")
+load("@rules_python//python:defs.bzl", "py_library", "py_test")
 
 # gazelle:python_generation_mode file
 
@@ -22,3 +22,13 @@
     visibility = ["//:__subpackages__"],
     deps = [":custom"],
 )
+
+py_test(
+    name = "bar_test",
+    srcs = ["bar_test.py"],
+)
+
+py_test(
+    name = "foo_test",
+    srcs = ["foo_test.py"],
+)
diff --git a/gazelle/python/testdata/per_file/bar_test.py b/gazelle/python/testdata/per_file/bar_test.py
new file mode 100644
index 0000000..e69de29
--- /dev/null
+++ b/gazelle/python/testdata/per_file/bar_test.py
diff --git a/gazelle/python/testdata/per_file/foo_test.py b/gazelle/python/testdata/per_file/foo_test.py
new file mode 100644
index 0000000..e69de29
--- /dev/null
+++ b/gazelle/python/testdata/per_file/foo_test.py
diff --git a/gazelle/python/testdata/per_file_subdirs/bar/BUILD.out b/gazelle/python/testdata/per_file_subdirs/bar/BUILD.out
index 7258d27..4da8d9c 100644
--- a/gazelle/python/testdata/per_file_subdirs/bar/BUILD.out
+++ b/gazelle/python/testdata/per_file_subdirs/bar/BUILD.out
@@ -1,4 +1,4 @@
-load("@rules_python//python:defs.bzl", "py_library")
+load("@rules_python//python:defs.bzl", "py_library", "py_test")
 
 py_library(
     name = "__init__",
@@ -11,3 +11,21 @@
     srcs = ["foo.py"],
     visibility = ["//:__subpackages__"],
 )
+
+py_test(
+    name = "bar_test",
+    srcs = [
+        "__test__.py",
+        "bar_test.py",
+    ],
+    main = "__test__.py",
+)
+
+py_test(
+    name = "foo_test",
+    srcs = [
+        "__test__.py",
+        "foo_test.py",
+    ],
+    main = "__test__.py",
+)
diff --git a/gazelle/python/testdata/per_file_subdirs/bar/__test__.py b/gazelle/python/testdata/per_file_subdirs/bar/__test__.py
new file mode 100644
index 0000000..e69de29
--- /dev/null
+++ b/gazelle/python/testdata/per_file_subdirs/bar/__test__.py
diff --git a/gazelle/python/testdata/per_file_subdirs/bar/bar_test.py b/gazelle/python/testdata/per_file_subdirs/bar/bar_test.py
new file mode 100644
index 0000000..e69de29
--- /dev/null
+++ b/gazelle/python/testdata/per_file_subdirs/bar/bar_test.py
diff --git a/gazelle/python/testdata/per_file_subdirs/bar/foo_test.py b/gazelle/python/testdata/per_file_subdirs/bar/foo_test.py
new file mode 100644
index 0000000..e69de29
--- /dev/null
+++ b/gazelle/python/testdata/per_file_subdirs/bar/foo_test.py
diff --git a/gazelle/python/testdata/per_file_subdirs/test_target/BUILD.in b/gazelle/python/testdata/per_file_subdirs/test_target/BUILD.in
new file mode 100644
index 0000000..b5733da
--- /dev/null
+++ b/gazelle/python/testdata/per_file_subdirs/test_target/BUILD.in
@@ -0,0 +1,3 @@
+some_target(
+    name = "__test__",
+)
diff --git a/gazelle/python/testdata/per_file_subdirs/test_target/BUILD.out b/gazelle/python/testdata/per_file_subdirs/test_target/BUILD.out
new file mode 100644
index 0000000..f4a9236
--- /dev/null
+++ b/gazelle/python/testdata/per_file_subdirs/test_target/BUILD.out
@@ -0,0 +1,25 @@
+load("@rules_python//python:defs.bzl", "py_test")
+
+some_target(
+    name = "__test__",
+)
+
+py_test(
+    name = "a_test",
+    srcs = [
+        "a_test.py",
+        ":__test__",
+    ],
+    main = ":__test__.py",
+    deps = [":__test__"],
+)
+
+py_test(
+    name = "b_test",
+    srcs = [
+        "b_test.py",
+        ":__test__",
+    ],
+    main = ":__test__.py",
+    deps = [":__test__"],
+)
diff --git a/gazelle/python/testdata/per_file_subdirs/test_target/a_test.py b/gazelle/python/testdata/per_file_subdirs/test_target/a_test.py
new file mode 100644
index 0000000..e69de29
--- /dev/null
+++ b/gazelle/python/testdata/per_file_subdirs/test_target/a_test.py
diff --git a/gazelle/python/testdata/per_file_subdirs/test_target/b_test.py b/gazelle/python/testdata/per_file_subdirs/test_target/b_test.py
new file mode 100644
index 0000000..e69de29
--- /dev/null
+++ b/gazelle/python/testdata/per_file_subdirs/test_target/b_test.py