diff --git a/CHANGELOG.md b/CHANGELOG.md
index c19c77a..4114c4b 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -1,5 +1,17 @@
 # Changelog
 
+## Unreleased
+
+### Fixed
+
+- **`activate_venv/1` now processes `.pth` files** - Uses `site.addsitedir()` instead of
+  `sys.path.insert()` so that editable installs (uv, pip -e, poetry) work correctly.
+  New paths are moved to the front of `sys.path` for proper priority.
+
+- **`deactivate_venv/0` now restores `sys.path`** - The previous implementation used
+  `py:eval` with semicolon-separated statements which silently failed (eval only accepts
+  expressions). Switched to `py:exec` for correct statement execution.
+
 ## 1.8.1 (2026-02-25)
 
 ### Fixed
diff --git a/src/py.erl b/src/py.erl
index 1db65ed..a23f532 100644
--- a/src/py.erl
+++ b/src/py.erl
@@ -490,6 +490,11 @@ parallel(Calls) when is_list(Calls) ->
 %% This modifies sys.path to use packages from the specified venv.
 %% The venv path should be the root directory (containing bin/lib folders).
 %%
+%% `.pth' files in the venv's site-packages directory are processed, so
+%% editable installs created by uv, pip, or any PEP 517/660 compliant tool
+%% work correctly.  New paths are inserted at the front of sys.path so that
+%% venv packages take priority over system packages.
+%%
 %% Example:
 %% ```
 %% ok = py:activate_venv(<<"/path/to/myenv">>).
@@ -504,12 +509,16 @@ activate_venv(VenvPath) ->
     case eval(<<"__import__('os').path.isdir(sp)">>, #{sp => SitePackages}) of
         {ok, true} ->
             %% Save original path if not already saved
-            _ = eval(<<"setattr(__import__('sys'), '_original_path', __import__('sys').path.copy()) if not hasattr(__import__('sys'), '_original_path') else None">>),
+            {ok, _} = eval(<<"setattr(__import__('sys'), '_original_path', __import__('sys').path.copy()) if not hasattr(__import__('sys'), '_original_path') else None">>),
             %% Set venv info
-            _ = eval(<<"setattr(__import__('sys'), '_active_venv', vp)">>, #{vp => VenvBin}),
-            _ = eval(<<"setattr(__import__('sys'), '_venv_site_packages', sp)">>, #{sp => SitePackages}),
-            %% Add to sys.path
-            _ = eval(<<"__import__('sys').path.insert(0, sp) if sp not in __import__('sys').path else None">>, #{sp => SitePackages}),
+            {ok, _} = eval(<<"setattr(__import__('sys'), '_active_venv', vp)">>, #{vp => VenvBin}),
+            {ok, _} = eval(<<"setattr(__import__('sys'), '_venv_site_packages', sp)">>, #{sp => SitePackages}),
+            %% Add site-packages and process .pth files (editable installs)
+            ok = exec(<<"import site as _site, sys as _sys\n"
+                         "_b = frozenset(_sys.path)\n"
+                         "_site.addsitedir(_sys._venv_site_packages)\n"
+                         "_sys.path[:] = [p for p in _sys.path if p not in _b] + [p for p in _sys.path if p in _b]\n"
+                         "del _site, _sys, _b\n">>),
             ok;
         {ok, false} ->
             {error, {invalid_venv, SitePackages}};
@@ -523,10 +532,12 @@ activate_venv(VenvPath) ->
 deactivate_venv() ->
     case eval(<<"hasattr(__import__('sys'), '_original_path')">>) of
         {ok, true} ->
-            _ = eval(<<"__import__('sys').path.clear(); __import__('sys').path.extend(__import__('sys')._original_path)">>),
-            _ = eval(<<"delattr(__import__('sys'), '_original_path')">>),
-            _ = eval(<<"delattr(__import__('sys'), '_active_venv') if hasattr(__import__('sys'), '_active_venv') else None">>),
-            _ = eval(<<"delattr(__import__('sys'), '_venv_site_packages') if hasattr(__import__('sys'), '_venv_site_packages') else None">>),
+            ok = exec(<<"import sys as _sys\n"
+                         "_sys.path[:] = _sys._original_path\n"
+                         "del _sys\n">>),
+            {ok, _} = eval(<<"delattr(__import__('sys'), '_original_path')">>),
+            {ok, _} = eval(<<"delattr(__import__('sys'), '_active_venv') if hasattr(__import__('sys'), '_active_venv') else None">>),
+            {ok, _} = eval(<<"delattr(__import__('sys'), '_venv_site_packages') if hasattr(__import__('sys'), '_venv_site_packages') else None">>),
             ok;
         {ok, false} ->
             ok;
diff --git a/test/py_SUITE.erl b/test/py_SUITE.erl
index 9ed99ad..9d75f2b 100644
--- a/test/py_SUITE.erl
+++ b/test/py_SUITE.erl
@@ -37,6 +37,7 @@
     test_subinterp_supported/1,
     test_parallel_execution/1,
     test_venv/1,
+    test_venv_pth/1,
     %% New scalability tests
     test_execution_mode/1,
     test_num_executors/1,
@@ -87,6 +88,7 @@ all() ->
         test_subinterp_supported,
         test_parallel_execution,
         test_venv,
+        test_venv_pth,
         %% Scalability tests
         test_execution_mode,
         test_num_executors,
@@ -634,11 +636,16 @@ test_venv(_Config) ->
     true = is_binary(maps:get(<<"venv_path">>, Info)),
     true = is_binary(maps:get(<<"site_packages">>, Info)),
 
+    %% site-packages must be in sys.path and at position 0
+    {ok, true} = py:eval(<<"sp in __import__('sys').path">>, #{sp => SitePackages}),
+    {ok, 0} = py:eval(<<"__import__('sys').path.index(sp)">>, #{sp => SitePackages}),
+
     %% Deactivate
     ok = py:deactivate_venv(),
 
-    %% Verify deactivated
+    %% Verify deactivated: venv_info and sys.path both restored
     {ok, #{<<"active">> := false}} = py:venv_info(),
+    {ok, false} = py:eval(<<"sp in __import__('sys').path">>, #{sp => SitePackages}),
 
     %% Test error case - invalid path
     {error, _} = py:activate_venv(<<"/nonexistent/path">>),
@@ -648,6 +655,41 @@ test_venv(_Config) ->
 
     ok.
 
+test_venv_pth(_Config) ->
+    %% Verify .pth files are processed (editable installs)
+    TmpDir = <<"/tmp/erlang_python_test_venv_pth">>,
+    PkgSrc = <<"/tmp/erlang_python_test_pth_src">>,
+
+    {ok, PyVer} = py:eval(<<"f'python{__import__(\"sys\").version_info.major}.{__import__(\"sys\").version_info.minor}'">>),
+    SitePackages = <<TmpDir/binary, "/lib/", PyVer/binary, "/site-packages">>,
+
+    %% Create fake venv with a .pth file pointing at PkgSrc
+    {ok, _} = py:call(os, makedirs, [SitePackages], #{exist_ok => true}),
+    {ok, _} = py:call(os, makedirs, [PkgSrc], #{exist_ok => true}),
+    PthFile = <<SitePackages/binary, "/test_editable.pth">>,
+    {ok, _} = py:eval(<<"open(pf, 'w').write(pd + '\\n')">>, #{pf => PthFile, pd => PkgSrc}),
+
+    %% Drop a module in PkgSrc so we can verify it's importable
+    ModFile = <<PkgSrc/binary, "/ep_test_editable_mod.py">>,
+    {ok, _} = py:eval(<<"open(f, 'w').write('answer = 42\\n')">>, #{f => ModFile}),
+
+    {ok, false} = py:eval(<<"pd in __import__('sys').path">>, #{pd => PkgSrc}),
+
+    %% Activate and verify paths and import
+    ok = py:activate_venv(TmpDir),
+    {ok, 0} = py:eval(<<"__import__('sys').path.index(sp)">>, #{sp => SitePackages}),
+    {ok, 1} = py:eval(<<"__import__('sys').path.index(pd)">>, #{pd => PkgSrc}),
+    {ok, 42} = py:eval(<<"__import__('ep_test_editable_mod').answer">>),
+
+    %% Deactivate and verify cleanup
+    ok = py:deactivate_venv(),
+    {ok, false} = py:eval(<<"pd in __import__('sys').path">>, #{pd => PkgSrc}),
+    {ok, false} = py:eval(<<"sp in __import__('sys').path">>, #{sp => SitePackages}),
+
+    {ok, _} = py:call(shutil, rmtree, [TmpDir], #{ignore_errors => true}),
+    {ok, _} = py:call(shutil, rmtree, [PkgSrc], #{ignore_errors => true}),
+    ok.
+
 %%% ============================================================================
 %%% Scalability Tests
 %%% ============================================================================