diff --git a/mypyc/irbuild/expression.py b/mypyc/irbuild/expression.py
index 14c11e07090df..34212aebe0cb2 100644
--- a/mypyc/irbuild/expression.py
+++ b/mypyc/irbuild/expression.py
@@ -26,10 +26,10 @@
 from mypyc.ir.func_ir import FUNC_CLASSMETHOD, FUNC_STATICMETHOD
 from mypyc.primitives.registry import CFunctionDescription, builtin_names
 from mypyc.primitives.generic_ops import iter_op
-from mypyc.primitives.misc_ops import new_slice_op, ellipsis_op, type_op
+from mypyc.primitives.misc_ops import new_slice_op, ellipsis_op, type_op, get_module_dict_op
 from mypyc.primitives.list_ops import list_append_op, list_extend_op, list_slice_op
 from mypyc.primitives.tuple_ops import list_tuple_op, tuple_slice_op
-from mypyc.primitives.dict_ops import dict_new_op, dict_set_item_op
+from mypyc.primitives.dict_ops import dict_new_op, dict_set_item_op, dict_get_item_op
 from mypyc.primitives.set_ops import new_set_op, set_add_op, set_update_op
 from mypyc.primitives.str_ops import str_slice_op
 from mypyc.primitives.int_ops import int_comparison_op_mapping
@@ -85,8 +85,21 @@ def transform_name_expr(builder: IRBuilder, expr: NameExpr) -> Value:
                     expr.node.name),
                 expr.node.line)
 
-        # TODO: Behavior currently only defined for Var and FuncDef node types.
-        return builder.read(builder.get_assignment_target(expr), expr.line)
+        # TODO: Behavior currently only defined for Var, FuncDef and MypyFile node types.
+        if isinstance(expr.node, MypyFile):
+            # Load reference to a module imported inside function from
+            # the modules dictionary. It would be closer to Python
+            # semantics to access modules imported inside functions
+            # via local variables, but this is tricky since the mypy
+            # AST doesn't include a Var node for the module. We
+            # instead load the module separately on each access.
+            mod_dict = builder.call_c(get_module_dict_op, [], expr.line)
+            obj = builder.call_c(dict_get_item_op,
+                                 [mod_dict, builder.load_static_unicode(expr.node.fullname)],
+                                 expr.line)
+            return obj
+        else:
+            return builder.read(builder.get_assignment_target(expr), expr.line)
 
     return builder.load_global(expr)
 
diff --git a/mypyc/irbuild/statement.py b/mypyc/irbuild/statement.py
index b83bc4beafe9e..b56175ae3e2f6 100644
--- a/mypyc/irbuild/statement.py
+++ b/mypyc/irbuild/statement.py
@@ -131,6 +131,8 @@ def transform_import(builder: IRBuilder, node: Import) -> None:
         # that mypy couldn't find, since it doesn't analyze module references
         # from those properly.
 
+        # TODO: Don't add local imports to the global namespace
+
         # Miscompiling imports inside of functions, like below in import from.
         if as_name:
             name = as_name
@@ -140,8 +142,10 @@ def transform_import(builder: IRBuilder, node: Import) -> None:
 
         # Python 3.7 has a nice 'PyImport_GetModule' function that we can't use :(
         mod_dict = builder.call_c(get_module_dict_op, [], node.line)
+        # Get top-level module/package object.
         obj = builder.call_c(dict_get_item_op,
                              [mod_dict, builder.load_static_unicode(base)], node.line)
+
         builder.gen_method_call(
             globals, '__setitem__', [builder.load_static_unicode(name), obj],
             result_type=None, line=node.line)
diff --git a/mypyc/test-data/irbuild-basic.test b/mypyc/test-data/irbuild-basic.test
index fc60b99ea29b7..5917ef529413b 100644
--- a/mypyc/test-data/irbuild-basic.test
+++ b/mypyc/test-data/irbuild-basic.test
@@ -3637,3 +3637,54 @@ L0:
     c = r2
     r3 = (c, b, a)
     return r3
+
+[case testLocalImportSubmodule]
+def f() -> int:
+    import p.m
+    return p.x
+[file p/__init__.py]
+x = 1
+[file p/m.py]
+[out]
+def f():
+    r0 :: dict
+    r1, r2 :: object
+    r3 :: bit
+    r4 :: str
+    r5 :: object
+    r6 :: dict
+    r7 :: str
+    r8 :: object
+    r9 :: str
+    r10 :: int32
+    r11 :: bit
+    r12 :: dict
+    r13 :: str
+    r14 :: object
+    r15 :: str
+    r16 :: object
+    r17 :: int
+L0:
+    r0 = __main__.globals :: static
+    r1 = p.m :: module
+    r2 = load_address _Py_NoneStruct
+    r3 = r1 != r2
+    if r3 goto L2 else goto L1 :: bool
+L1:
+    r4 = load_global CPyStatic_unicode_1 :: static  ('p.m')
+    r5 = PyImport_Import(r4)
+    p.m = r5 :: module
+L2:
+    r6 = PyImport_GetModuleDict()
+    r7 = load_global CPyStatic_unicode_2 :: static  ('p')
+    r8 = CPyDict_GetItem(r6, r7)
+    r9 = load_global CPyStatic_unicode_2 :: static  ('p')
+    r10 = CPyDict_SetItem(r0, r9, r8)
+    r11 = r10 >= 0 :: signed
+    r12 = PyImport_GetModuleDict()
+    r13 = load_global CPyStatic_unicode_2 :: static  ('p')
+    r14 = CPyDict_GetItem(r12, r13)
+    r15 = load_global CPyStatic_unicode_3 :: static  ('x')
+    r16 = CPyObject_GetAttr(r14, r15)
+    r17 = unbox(int, r16)
+    return r17
diff --git a/mypyc/test-data/run-imports.test b/mypyc/test-data/run-imports.test
index 6b5a70cf6ced3..78b167861ae82 100644
--- a/mypyc/test-data/run-imports.test
+++ b/mypyc/test-data/run-imports.test
@@ -5,9 +5,45 @@ import testmodule
 
 def f(x: int) -> int:
     return testmodule.factorial(5)
+
 def g(x: int) -> int:
     from welp import foo
     return foo(x)
+
+def test_import_basics() -> None:
+    assert f(5) == 120
+    assert g(5) == 5
+
+def test_import_submodule_within_function() -> None:
+    import pkg.mod
+    assert pkg.x == 1
+    assert pkg.mod.y == 2
+
+def test_import_as_submodule_within_function() -> None:
+    import pkg.mod as mm
+    assert mm.y == 2
+
+# TODO: Don't add local imports to globals()
+#
+# def test_local_import_not_in_globals() -> None:
+#     import nob
+#     assert 'nob' not in globals()
+
+def test_import_module_without_stub_in_function() -> None:
+    # 'virtualenv' must not have a stub in typeshed for this test case
+    import virtualenv  # type: ignore
+    # TODO: We shouldn't add local imports to globals()
+    # assert 'virtualenv' not in globals()
+    assert isinstance(virtualenv.__name__, str)
+
+def test_import_as_module_without_stub_in_function() -> None:
+    # 'virtualenv' must not have a stub in typeshed for this test case
+    import virtualenv as vv  # type: ignore
+    assert 'virtualenv' not in globals()
+    # TODO: We shouldn't add local imports to globals()
+    # assert 'vv' not in globals()
+    assert isinstance(vv.__name__, str)
+
 [file testmodule.py]
 def factorial(x: int) -> int:
     if x == 0:
@@ -17,13 +53,12 @@ def factorial(x: int) -> int:
 [file welp.py]
 def foo(x: int) -> int:
     return x
-[file driver.py]
-from native import f, g
-print(f(5))
-print(g(5))
-[out]
-120
-5
+[file pkg/__init__.py]
+x = 1
+[file pkg/mod.py]
+y = 2
+[file nob.py]
+z = 3
 
 [case testImportMissing]
 # The unchecked module is configured by the test harness to not be