diff --git a/internal/cmd/import-test/with-import-common.zed b/internal/cmd/import-test/with-import-common.zed
new file mode 100644
index 00000000..b002e033
--- /dev/null
+++ b/internal/cmd/import-test/with-import-common.zed
@@ -0,0 +1,6 @@
+definition user {}
+
+caveat mycaveat(day_of_week string) {
+    day_of_week == "friday"
+}
+
diff --git a/internal/cmd/import-test/with-import-root.zed b/internal/cmd/import-test/with-import-root.zed
new file mode 100644
index 00000000..b57c62fe
--- /dev/null
+++ b/internal/cmd/import-test/with-import-root.zed
@@ -0,0 +1,10 @@
+use import
+
+import "with-import-common.zed"
+
+definition resource {
+    relation writer: user
+    relation reader: user with mycaveat
+    permission write = writer
+    permission view = reader + write
+}
\ No newline at end of file
diff --git a/internal/cmd/import-test/with-import-validation-file.yaml b/internal/cmd/import-test/with-import-validation-file.yaml
new file mode 100644
index 00000000..7c372fae
--- /dev/null
+++ b/internal/cmd/import-test/with-import-validation-file.yaml
@@ -0,0 +1,5 @@
+---
+schemaFile: "./with-import-root.zed"
+relationships: |-
+  resource:1#reader@user:1[mycaveat]
+  resource:2#writer@user:1
diff --git a/internal/cmd/import.go b/internal/cmd/import.go
index 8ce71fb9..0e4de0db 100644
--- a/internal/cmd/import.go
+++ b/internal/cmd/import.go
@@ -82,7 +82,7 @@ func importCmdFunc(cmd *cobra.Command, schemaClient v1.SchemaServiceClient, rela
 	}
 
 	if cobrautil.MustGetBool(cmd, "schema") {
-		if err := importSchema(cmd.Context(), schemaClient, p.Schema.Schema, prefix); err != nil {
+		if err := importSchema(cmd.Context(), schemaClient, p.Schema.Schema, prefix, p.RootSchemaDir); err != nil {
 			return fmt.Errorf("error importing schema: %w", err)
 		}
 	}
@@ -98,11 +98,12 @@ func importCmdFunc(cmd *cobra.Command, schemaClient v1.SchemaServiceClient, rela
 	return err
 }
 
-func importSchema(ctx context.Context, client v1.SchemaServiceClient, schema string, definitionPrefix string) error {
+func importSchema(ctx context.Context, client v1.SchemaServiceClient, schema string, definitionPrefix string, rootSchemaDir string) error {
 	log.Info().Msg("importing schema")
 
-	// Recompile the schema with the specified prefix.
-	schemaText, err := rewriteSchema(ctx, schema, definitionPrefix)
+	// Compile with the schema's root directory so any `import` statements resolve, and
+	// (optionally) apply the definition prefix.
+	schemaText, err := rewriteSchema(ctx, schema, definitionPrefix, rootSchemaDir)
 	if err != nil {
 		return err
 	}
diff --git a/internal/cmd/import_test.go b/internal/cmd/import_test.go
index 11c76fab..d6847022 100644
--- a/internal/cmd/import_test.go
+++ b/internal/cmd/import_test.go
@@ -103,6 +103,53 @@ func TestImportCmd(t *testing.T) {
 	}
 }
 
+func TestImportCmdSchemaWithImports(t *testing.T) {
+	require := require.New(t)
+	cmd := zedtesting.CreateTestCobraCommandWithFlagValue(t,
+		zedtesting.StringFlag{FlagName: "schema-definition-prefix"},
+		zedtesting.BoolFlag{FlagName: "schema", FlagValue: true},
+		zedtesting.BoolFlag{FlagName: "relationships", FlagValue: true},
+		zedtesting.IntFlag{FlagName: "batch-size", FlagValue: 100},
+		zedtesting.IntFlag{FlagName: "workers", FlagValue: 1},
+	)
+	f := filepath.Join("import-test", "with-import-validation-file.yaml")
+
+	ctx := t.Context()
+	srv := zedtesting.NewTestServer(ctx, t)
+	go func() {
+		assert.NoError(t, srv.Run(ctx))
+	}()
+	conn, err := srv.GRPCDialContext(ctx)
+	require.NoError(err)
+	t.Cleanup(func() {
+		conn.Close()
+	})
+
+	c, err := zedtesting.ClientFromConn(conn)(cmd)
+	require.NoError(err)
+
+	// The YAML points to a .zed file that uses `import "with-import-common.zed"`. WriteSchema
+	// rejects `import` statements, so this exercises that the client flattens the schema
+	// (via rewriteSchema + SourceFolder) before sending.
+	err = importCmdFunc(cmd, c, c, "", f)
+	require.NoError(err)
+
+	rel := tuple.MustParse(`resource:1#view@user:1[mycaveat]`)
+	resp, err := c.CheckPermission(ctx, &v1.CheckPermissionRequest{
+		Consistency: fullyConsistent,
+		Subject:     &v1.SubjectReference{Object: &v1.ObjectReference{ObjectType: rel.Subject.ObjectType, ObjectId: rel.Subject.ObjectID}},
+		Permission:  "view",
+		Resource:    &v1.ObjectReference{ObjectType: rel.Resource.ObjectType, ObjectId: rel.Resource.ObjectID},
+		Context: &structpb.Struct{
+			Fields: map[string]*structpb.Value{
+				"day_of_week": structpb.NewStringValue("friday"),
+			},
+		},
+	})
+	require.NoError(err)
+	require.Equal(v1.CheckPermissionResponse_PERMISSIONSHIP_HAS_PERMISSION, resp.Permissionship)
+}
+
 func TestImportCmdRelationsOnly(t *testing.T) {
 	cmd := zedtesting.CreateTestCobraCommandWithFlagValue(t,
 		zedtesting.StringFlag{FlagName: "schema-definition-prefix"},
diff --git a/internal/cmd/schema.go b/internal/cmd/schema.go
index 031117fd..b3a75b54 100644
--- a/internal/cmd/schema.go
+++ b/internal/cmd/schema.go
@@ -235,7 +235,7 @@ func schemaCopyInner(ctx context.Context, srcClient, destClient v1.SchemaService
 		return nil, err
 	}
 
-	schemaText, err := rewriteSchema(ctx, readResp.SchemaText, prefix)
+	schemaText, err := rewriteSchema(ctx, readResp.SchemaText, prefix, "")
 	if err != nil {
 		return nil, err
 	}
@@ -263,12 +263,14 @@ func schemaWriteCmdImpl(cmd *cobra.Command, args []string, client v1.SchemaServi
 	}
 
 	var schemaBytes []byte
+	var sourceFolder string
 	switch len(args) {
 	case 1:
 		schemaBytes, err = os.ReadFile(args[0])
 		if err != nil {
 			return fmt.Errorf("failed to read schema file: %w", err)
 		}
+		sourceFolder = filepath.Dir(args[0])
 		log.Trace().Str("schema", string(schemaBytes)).Str("file", args[0]).Msg("read schema from file")
 	case 0:
 		schemaBytes, err = io.ReadAll(os.Stdin)
@@ -289,7 +291,7 @@ func schemaWriteCmdImpl(cmd *cobra.Command, args []string, client v1.SchemaServi
 		return err
 	}
 
-	schemaText, err := rewriteSchema(cmd.Context(), string(schemaBytes), prefix)
+	schemaText, err := rewriteSchema(cmd.Context(), string(schemaBytes), prefix, sourceFolder)
 	if err != nil {
 		return err
 	}
@@ -316,8 +318,8 @@ func schemaWriteCmdImpl(cmd *cobra.Command, args []string, client v1.SchemaServi
 }
 
 // rewriteSchema rewrites the given existing schema to include the specified prefix on all definitions and caveats.
-func rewriteSchema(ctx context.Context, existingSchemaText string, definitionPrefix string) (string, error) {
-	if definitionPrefix == "" {
+func rewriteSchema(ctx context.Context, existingSchemaText string, definitionPrefix string, sourceFolder string) (string, error) {
+	if definitionPrefix == "" && sourceFolder == "" {
 		return existingSchemaText, nil
 	}
 
@@ -325,6 +327,7 @@ func rewriteSchema(ctx context.Context, existingSchemaText string, definitionPre
 		compiler.InputSchema{Source: input.Source("schema"), SchemaString: existingSchemaText},
 		compiler.ObjectTypePrefix(definitionPrefix),
 		compiler.SkipValidation(),
+		compiler.SourceFolder(sourceFolder),
 	)
 	if err != nil {
 		return "", err
diff --git a/internal/cmd/schema_test.go b/internal/cmd/schema_test.go
index ac83ce07..bb4ea34e 100644
--- a/internal/cmd/schema_test.go
+++ b/internal/cmd/schema_test.go
@@ -123,7 +123,7 @@ caveat test/some_caveat(someCondition int) {
 
 	for _, test := range tests {
 		t.Run(test.name, func(t *testing.T) {
-			found, err := rewriteSchema(t.Context(), test.existingSchema, test.definitionPrefix)
+			found, err := rewriteSchema(t.Context(), test.existingSchema, test.definitionPrefix, "")
 			require.NoError(t, err)
 			require.Equal(t, test.expectedSchema, found)
 		})
@@ -375,9 +375,10 @@ func TestSchemaWrite(t *testing.T) {
 				}, nil
 			},
 			expectSchemaWritten: `definition user {}
+
 definition resource {
-  relation view: user
-  permission viewer = view
+	relation view: user
+	permission viewer = view
 }`,
 			terminalChecker: &mockTermChecker{returnVal: false},
 		},