As @Chris suggested, you can use Pandoc to convert Markdown to RST. This can be simply automated using pypandoc module and some magic in setup.py:

from setuptools import setup
try:
    from pypandoc import convert
    read_md = lambda f: convert(f, 'rst')
except ImportError:
    print("warning: pypandoc module not found, could not convert Markdown to RST")
    read_md = lambda f: open(f, 'r').read()

setup(
    # name, version, ...
    long_description=read_md('README.md'),
    install_requires=[]
)

This will automatically convert README.md to RST for the long description using on PyPi. When pypandoc is not available, then it just reads README.md without the conversion – to not force others to install pypandoc when they wanna just build the module, not upload to PyPi.

So you can write in Markdown as usual and don’t care about RST mess anymore.

2019 Update

The PyPI Warehouse now supports rendering Markdown as well! You just need to update your package configuration and add the long_description_content_type='text/markdown' to it. e.g.:

setup(
    name='an_example_package',
    # other arguments omitted
    long_description=long_description,
    long_description_content_type='text/markdown'
)

Therefore, there is no need to keep the README in two formats any longer.

You can find more information about it in the documentation.

Old answer:

The Markup library used by GitHub supports reStructuredText. This means you can write a README.rst file.

They even support syntax specific color highlighting using the code and code-block directives (Example)

Using the pandoc tool suggested by others I created a md2rst utility to create the rst files. Even though this solution means you have both an md and an rst it seemed to be the least invasive and would allow for whatever future markdown support is added. I prefer it over altering setup.py and maybe you would as well:

#!/usr/bin/env python

'''
Recursively and destructively creates a .rst file for all Markdown
files in the target directory and below.

Created to deal with PyPa without changing anything in setup based on
the idea that getting proper Markdown support later is worth waiting
for rather than forcing a pandoc dependency in sample packages and such.

Vote for
(https://bitbucket.org/pypa/pypi/issue/148/support-markdown-for-readmes)

'''

import sys, os, re

markdown_sufs = ('.md','.markdown','.mkd')
markdown_regx = '.(md|markdown|mkd)$'

target = '.'
if len(sys.argv) >= 2: target = sys.argv[1]

md_files = []
for root, dirnames, filenames in os.walk(target):
    for name in filenames:
        if name.endswith(markdown_sufs):
            md_files.append(os.path.join(root, name))

for md in md_files:
    bare = re.sub(markdown_regx,'',md)
    cmd='pandoc --from=markdown --to=rst "{}" -o "{}.rst"'
    print(cmd.format(md,bare))
    os.system(cmd.format(md,bare))

I ran into this problem and solved it with the two following bash scripts.

Note that I have LaTeX bundled into my Markdown.

#!/usr/bin/env bash

if [ $# -lt 1 ]; then
  echo "$0 file.md"
  exit;
fi

filename=$(basename "$1")
extension="${filename##*.}"
filename="${filename%.*}"

if [ "$extension" = "md" ]; then
  rst=".rst"
  pandoc $1 -o $filename$rst
fi

Its also useful to convert to html. md2html:

#!/usr/bin/env bash

if [ $# -lt 1 ]; then
  echo "$0 file.md <style.css>"
  exit;
fi

filename=$(basename "$1")
extension="${filename##*.}"
filename="${filename%.*}"

if [ "$extension" = "md" ]; then
  html=".html"
  if [ -z $2 ]; then
    # if no css
    pandoc -s -S --mathjax --highlight-style pygments $1 -o $filename$html
  else
    pandoc -s -S --mathjax --highlight-style pygments -c $2 $1 -o $filename$html
  fi
fi

I hope that helps

You might also be interested in the fact that it is possible to write in a common subset so that your document comes out the same way when rendered as markdown or rendered as reStructuredText: https://gist.github.com/dupuy/1855764 ☺

For my requirements I didn’t want to install Pandoc in my computer. I used docverter. Docverter is a document conversion server with an HTTP interface using Pandoc for this.

import requests
r = requests.post(url='http://c.docverter.com/convert',
                  data={'to':'rst','from':'markdown'},
                  files={'input_files[]':open('README.md','rb')})
if r.ok:
    print r.content

PyPI now supports Markdown for long descriptions!

In setup.py, set long_description to a Markdown string, add long_description_content_type="text/markdown" and make sure you’re using recent tooling (setuptools 38.6.0+, twine 1.11+).

See Dustin Ingram’s blog post for more details.