diff --git a/python/src/com/jetbrains/python/inspections/unresolvedReference/PyUnresolvedReferencesInspection.java b/python/src/com/jetbrains/python/inspections/unresolvedReference/PyUnresolvedReferencesInspection.java
index 37ff6c0afc0b..5f6961bad551 100644
--- a/python/src/com/jetbrains/python/inspections/unresolvedReference/PyUnresolvedReferencesInspection.java
+++ b/python/src/com/jetbrains/python/inspections/unresolvedReference/PyUnresolvedReferencesInspection.java
@@ -383,16 +383,7 @@ public class PyUnresolvedReferencesInspection extends PyInspection {
     }
 
     private static boolean isContainingFileImportAllowed(PyElement node, PsiFile target) {
-      // import resolving to containing file is allowed when we're importing from the current package and the containing file
-      // is __init__.py (PY-5265)
-      final boolean insideFromImport = PsiTreeUtil.getParentOfType(node, PyFromImportStatement.class) != null;
-      if (!insideFromImport) {
-        return false;
-      }
-      if (PyImportStatementNavigator.getImportStatementByElement(node) != null) {
-        return false;
-      }
-      return target.getName().equals(PyNames.INIT_DOT_PY);
+      return PyImportStatementNavigator.getImportStatementByElement(node) == null && target.getName().equals(PyNames.INIT_DOT_PY);
     }
 
     private void processReferenceInImportGuard(PyElement node, PyExceptPart guard) {
diff --git a/python/testData/inspections/PyUnresolvedReferencesInspection/ImportToContainingFileInPackage/p1/__init__.py b/python/testData/inspections/PyUnresolvedReferencesInspection/ImportToContainingFileInPackage/p1/__init__.py
new file mode 100644
index 000000000000..f72078f20b5c
--- /dev/null
+++ b/python/testData/inspections/PyUnresolvedReferencesInspection/ImportToContainingFileInPackage/p1/__init__.py
@@ -0,0 +1 @@
+import p1.m1
diff --git a/python/testData/inspections/PyUnresolvedReferencesInspection/ImportToContainingFileInPackage/p1/m1.py b/python/testData/inspections/PyUnresolvedReferencesInspection/ImportToContainingFileInPackage/p1/m1.py
new file mode 100644
index 000000000000..e69de29bb2d1
diff --git a/python/testSrc/com/jetbrains/python/inspections/PyUnresolvedReferencesInspectionTest.java b/python/testSrc/com/jetbrains/python/inspections/PyUnresolvedReferencesInspectionTest.java
index 35097e0ea6c3..5367412c133e 100644
--- a/python/testSrc/com/jetbrains/python/inspections/PyUnresolvedReferencesInspectionTest.java
+++ b/python/testSrc/com/jetbrains/python/inspections/PyUnresolvedReferencesInspectionTest.java
@@ -435,6 +435,11 @@ public class PyUnresolvedReferencesInspectionTest extends PyInspectionTestCase {
     doTest();
   }
 
+  // PY-14398
+  public void testImportToContainingFileInPackage() {
+    doMultiFileTest("p1/__init__.py");
+  }
+
   @NotNull
   @Override
   protected Class<? extends PyInspection> getInspectionClass() {