Probably the best way to do this is to use the setuptools package_data directive. This does mean using setuptools (or distribute) instead of distutils, but this is a very seamless “upgrade”.

Here’s a full (but untested) example:

from setuptools import setup, find_packages

setup(
    name="your_project_name",
    version='0.1',
    description='A description.',
    packages=find_packages(exclude=['ez_setup', 'tests', 'tests.*']),
    package_data={'': ['license.txt']},
    include_package_data=True,
    install_requires=[],
)

Note the specific lines that are critical here:

package_data={'': ['license.txt']},
include_package_data=True,

package_data is a dict of package names (empty = all packages) to a list of patterns (can include globs). For example, if you want to only specify files within your package, you can do that too:

package_data={'yourpackage': ['*.txt', 'path/to/resources/*.txt']}

The solution here is definitely not to rename your non-py files with a .py extension.

See Ian Bicking’s presentation for more info.

UPDATE: Another [Better] Approach

Another approach that works well if you just want to control the contents of the source distribution (sdist) and have files outside of the package (e.g. top-level directory) is to add a MANIFEST.in file. See the Python documentation for the format of this file.

Since writing this response, I have found that using MANIFEST.in is typically a less frustrating approach to just make sure your source distribution (tar.gz) has the files you need.

For example, if you wanted to include the requirements.txt from top-level, recursively include the top-level “data” directory:

include requirements.txt
recursive-include data *

Nevertheless, in order for these files to be copied at install time to the package’s folder inside site-packages, you’ll need to supply include_package_data=True to the setup() function. See Adding Non-Code Files for more information.