diff --git a/python/src/com/jetbrains/python/psi/impl/PyStarImportElementImpl.java b/python/src/com/jetbrains/python/psi/impl/PyStarImportElementImpl.java
index 14eac1e5f26d..98a3d8ee17ed 100644
--- a/python/src/com/jetbrains/python/psi/impl/PyStarImportElementImpl.java
+++ b/python/src/com/jetbrains/python/psi/impl/PyStarImportElementImpl.java
@@ -7,7 +7,6 @@ import com.intellij.psi.util.PsiTreeUtil;
 import com.intellij.util.containers.HashSet;
 import com.jetbrains.python.psi.*;
 import com.jetbrains.python.psi.resolve.PyResolveUtil;
-import com.jetbrains.python.psi.resolve.ResolveImportUtil;
 import com.jetbrains.python.toolbox.ChainIterable;
 import org.jetbrains.annotations.NotNull;
 import org.jetbrains.annotations.Nullable;
@@ -29,8 +28,7 @@ public class PyStarImportElementImpl extends PyElementImpl implements PyStarImpo
   public Iterable<PyElement> iterateNames() {
     if (getParent() instanceof PyFromImportStatement) {
       PyFromImportStatement fromImportStatement = (PyFromImportStatement)getParent();
-      final List<PsiElement> importedFiles =
-        ResolveImportUtil.resolveFromImportStatementSource(fromImportStatement, fromImportStatement.getImportSourceQName());
+      final List<PsiElement> importedFiles = fromImportStatement.resolveImportSourceCandidates();
       ChainIterable<PyElement> chain = new ChainIterable<PyElement>();
       for (PsiElement importedFile : new HashSet<PsiElement>(importedFiles)) { // resolver gives lots of duplicates
         final PsiElement source = PyUtil.turnDirIntoInit(importedFile);
@@ -50,8 +48,7 @@ public class PyStarImportElementImpl extends PyElementImpl implements PyStarImpo
     }
     if (getParent() instanceof PyFromImportStatement) {
       PyFromImportStatement fromImportStatement = (PyFromImportStatement)getParent();
-      final List<PsiElement> importedFiles =
-        ResolveImportUtil.resolveFromImportStatementSource(fromImportStatement, fromImportStatement.getImportSourceQName());
+      final List<PsiElement> importedFiles = fromImportStatement.resolveImportSourceCandidates();
       for (PsiElement importedFile : new HashSet<PsiElement>(importedFiles)) { // resolver gives lots of duplicates
         final PsiElement source = PyUtil.turnDirIntoInit(importedFile);
         if (source instanceof PyFile) {
diff --git a/python/testData/resolve/multiFile/relativePackageStarImport/b/__init__.py b/python/testData/resolve/multiFile/relativePackageStarImport/b/__init__.py
new file mode 100644
index 000000000000..b937ba6ac582
--- /dev/null
+++ b/python/testData/resolve/multiFile/relativePackageStarImport/b/__init__.py
@@ -0,0 +1 @@
+def foo(): pass
diff --git a/python/testData/resolve/multiFile/relativePackageStarImport/b/c/__init__.py b/python/testData/resolve/multiFile/relativePackageStarImport/b/c/__init__.py
new file mode 100644
index 000000000000..4f95228042b1
--- /dev/null
+++ b/python/testData/resolve/multiFile/relativePackageStarImport/b/c/__init__.py
@@ -0,0 +1,3 @@
+from .. import *
+foo()
+#<ref>
\ No newline at end of file
diff --git a/python/testSrc/com/jetbrains/python/PyMultiFileResolveTest.java b/python/testSrc/com/jetbrains/python/PyMultiFileResolveTest.java
index 574229f3b9e0..1166b9921072 100644
--- a/python/testSrc/com/jetbrains/python/PyMultiFileResolveTest.java
+++ b/python/testSrc/com/jetbrains/python/PyMultiFileResolveTest.java
@@ -258,6 +258,16 @@ public class PyMultiFileResolveTest extends PyResolveTestCase {
     assertResolvesTo(PyFunction.class, "foo");
   }
 
+  public void testRelativePackageStarImport() {   // PY-7204
+    myTestFileName = "b/c/__init__.py";
+    try {
+      assertResolvesTo(PyFunction.class, "foo", "/src/b/__init__.py");
+    }
+    finally {
+      myTestFileName = null;
+    }
+  }
+
   public void testCythonFromModuleCImport() {
     assertResolvesTo(CythonFunction.class, "foo");
   }