diff --git a/pkg/compiler/analysis.go b/pkg/compiler/analysis.go
index 1c1dab8bd..899d9e35f 100644
--- a/pkg/compiler/analysis.go
+++ b/pkg/compiler/analysis.go
@@ -8,6 +8,7 @@ import (
 
 	"github.com/nspcc-dev/neo-go/pkg/vm/emit"
 	"github.com/nspcc-dev/neo-go/pkg/vm/opcode"
+	"golang.org/x/tools/go/loader"
 )
 
 var (
@@ -35,21 +36,54 @@ func (c *codegen) getIdentName(pkg string, name string) string {
 }
 
 // traverseGlobals visits and initializes global variables.
-// and returns number of variables initialized.
-func (c *codegen) traverseGlobals() int {
+// and returns number of variables initialized and
+// true if any init functions were encountered.
+func (c *codegen) traverseGlobals() (int, bool) {
 	var n int
+	var hasInit bool
 	c.ForEachFile(func(f *ast.File, _ *types.Package) {
 		n += countGlobals(f)
+		if !hasInit {
+			ast.Inspect(f, func(node ast.Node) bool {
+				n, ok := node.(*ast.FuncDecl)
+				if ok {
+					if isInitFunc(n) {
+						hasInit = true
+					}
+					return false
+				}
+				return true
+			})
+		}
 	})
-	if n != 0 {
+	if n != 0 || hasInit {
 		if n > 255 {
 			c.prog.BinWriter.Err = errors.New("too many global variables")
-			return 0
+			return 0, hasInit
 		}
-		emit.Instruction(c.prog.BinWriter, opcode.INITSSLOT, []byte{byte(n)})
-		c.ForEachFile(c.convertGlobals)
+		if n != 0 {
+			emit.Instruction(c.prog.BinWriter, opcode.INITSSLOT, []byte{byte(n)})
+		}
+		c.ForEachPackage(func(pkg *loader.PackageInfo) {
+			if n > 0 {
+				for _, f := range pkg.Files {
+					c.fillImportMap(f, pkg.Pkg)
+					c.convertGlobals(f, pkg.Pkg)
+				}
+			}
+			if hasInit {
+				for _, f := range pkg.Files {
+					c.fillImportMap(f, pkg.Pkg)
+					c.convertInitFuncs(f, pkg.Pkg)
+				}
+			}
+			// because we reuse `convertFuncDecl` for init funcs,
+			// we need to cleare scope, so that global variables
+			// encountered after will be recognized as globals.
+			c.scope = nil
+		})
 	}
-	return n
+	return n, hasInit
 }
 
 // countGlobals counts the global variables in the program to add
@@ -103,6 +137,32 @@ func lastStmtIsReturn(decl *ast.FuncDecl) (b bool) {
 	return false
 }
 
+// analyzePkgOrder sets the order in which packages should be processed.
+// From Go spec:
+//   A package with no imports is initialized by assigning initial values to all its package-level variables
+//   followed by calling all init functions in the order they appear in the source, possibly in multiple files,
+//   as presented to the compiler. If a package has imports, the imported packages are initialized before
+//   initializing the package itself. If multiple packages import a package, the imported package
+//   will be initialized only once. The importing of packages, by construction, guarantees
+//   that there can be no cyclic initialization dependencies.
+func (c *codegen) analyzePkgOrder() {
+	seen := make(map[string]bool)
+	info := c.buildInfo.program.Package(c.buildInfo.initialPackage)
+	c.visitPkg(info.Pkg, seen)
+}
+
+func (c *codegen) visitPkg(pkg *types.Package, seen map[string]bool) {
+	pkgPath := pkg.Path()
+	if seen[pkgPath] {
+		return
+	}
+	for _, imp := range pkg.Imports() {
+		c.visitPkg(imp, seen)
+	}
+	seen[pkgPath] = true
+	c.packages = append(c.packages, pkgPath)
+}
+
 func (c *codegen) analyzeFuncUsage() funcUsage {
 	usage := funcUsage{}
 
diff --git a/pkg/compiler/codegen.go b/pkg/compiler/codegen.go
index fc34b7b04..384c19197 100644
--- a/pkg/compiler/codegen.go
+++ b/pkg/compiler/codegen.go
@@ -74,6 +74,9 @@ type codegen struct {
 	// mainPkg is a main package metadata.
 	mainPkg *loader.PackageInfo
 
+	// packages contains packages in the order they were loaded.
+	packages []string
+
 	// Label table for recording jump destinations.
 	l []int
 }
@@ -275,24 +278,48 @@ func (c *codegen) convertGlobals(f *ast.File, _ *types.Package) {
 	})
 }
 
+func isInitFunc(decl *ast.FuncDecl) bool {
+	return decl.Name.Name == "init" && decl.Recv == nil &&
+		decl.Type.Params.NumFields() == 0 &&
+		decl.Type.Results.NumFields() == 0
+}
+
+func (c *codegen) convertInitFuncs(f *ast.File, pkg *types.Package) {
+	ast.Inspect(f, func(node ast.Node) bool {
+		switch n := node.(type) {
+		case *ast.FuncDecl:
+			if isInitFunc(n) {
+				c.convertFuncDecl(f, n, pkg)
+			}
+		case *ast.GenDecl:
+			return false
+		}
+		return true
+	})
+}
+
 func (c *codegen) convertFuncDecl(file ast.Node, decl *ast.FuncDecl, pkg *types.Package) {
 	var (
 		f            *funcScope
 		ok, isLambda bool
 	)
-
-	f, ok = c.funcs[c.getFuncNameFromDecl("", decl)]
-	if ok {
-		// If this function is a syscall or builtin we will not convert it to bytecode.
-		if isSyscall(f) || isCustomBuiltin(f) {
-			return
-		}
-		c.setLabel(f.label)
-	} else if f, ok = c.lambda[c.getIdentName("", decl.Name.Name)]; ok {
-		isLambda = ok
-		c.setLabel(f.label)
+	isInit := isInitFunc(decl)
+	if isInit {
+		f = c.newFuncScope(decl, c.newLabel())
 	} else {
-		f = c.newFunc(decl)
+		f, ok = c.funcs[c.getFuncNameFromDecl("", decl)]
+		if ok {
+			// If this function is a syscall or builtin we will not convert it to bytecode.
+			if isSyscall(f) || isCustomBuiltin(f) {
+				return
+			}
+			c.setLabel(f.label)
+		} else if f, ok = c.lambda[c.getIdentName("", decl.Name.Name)]; ok {
+			isLambda = ok
+			c.setLabel(f.label)
+		} else {
+			f = c.newFunc(decl)
+		}
 	}
 
 	f.rng.Start = uint16(c.prog.Len())
@@ -342,7 +369,7 @@ func (c *codegen) convertFuncDecl(file ast.Node, decl *ast.FuncDecl, pkg *types.
 	// If we have reached the end of the function without encountering `return` statement,
 	// we should clean alt.stack manually.
 	// This can be the case with void and named-return functions.
-	if !lastStmtIsReturn(decl) {
+	if !isInit && !lastStmtIsReturn(decl) {
 		c.saveSequencePoint(decl.Body)
 		emit.Opcode(c.prog.BinWriter, opcode.RET)
 	}
@@ -1462,13 +1489,14 @@ func (c *codegen) newLambda(u uint16, lit *ast.FuncLit) {
 
 func (c *codegen) compile(info *buildInfo, pkg *loader.PackageInfo) error {
 	c.mainPkg = pkg
+	c.analyzePkgOrder()
 	funUsage := c.analyzeFuncUsage()
 
 	// Bring all imported functions into scope.
 	c.ForEachFile(c.resolveFuncDecls)
 
-	n := c.traverseGlobals()
-	if n > 0 {
+	n, hasInit := c.traverseGlobals()
+	if n > 0 || hasInit {
 		emit.Opcode(c.prog.BinWriter, opcode.RET)
 		c.initEndOffset = c.prog.Len()
 	}
@@ -1488,7 +1516,7 @@ func (c *codegen) compile(info *buildInfo, pkg *loader.PackageInfo) error {
 				// Don't convert the function if it's not used. This will save a lot
 				// of bytecode space.
 				name := c.getFuncNameFromDecl(pkg.Path(), n)
-				if funUsage.funcUsed(name) && !isInteropPath(pkg.Path()) {
+				if !isInitFunc(n) && funUsage.funcUsed(name) && !isInteropPath(pkg.Path()) {
 					c.convertFuncDecl(f, n, pkg)
 				}
 			}
diff --git a/pkg/compiler/compiler.go b/pkg/compiler/compiler.go
index 76d48358f..aaefbc039 100644
--- a/pkg/compiler/compiler.go
+++ b/pkg/compiler/compiler.go
@@ -47,16 +47,25 @@ type buildInfo struct {
 	program        *loader.Program
 }
 
-// ForEachFile executes fn on each file used in current program.
-func (c *codegen) ForEachFile(fn func(*ast.File, *types.Package)) {
-	for _, pkg := range c.buildInfo.program.AllPackages {
+// ForEachPackage executes fn on each package used in the current program
+// in the order they should be initialized.
+func (c *codegen) ForEachPackage(fn func(*loader.PackageInfo)) {
+	for i := range c.packages {
+		pkg := c.buildInfo.program.Package(c.packages[i])
 		c.typeInfo = &pkg.Info
 		c.currPkg = pkg.Pkg
+		fn(pkg)
+	}
+}
+
+// ForEachFile executes fn on each file used in current program.
+func (c *codegen) ForEachFile(fn func(*ast.File, *types.Package)) {
+	c.ForEachPackage(func(pkg *loader.PackageInfo) {
 		for _, f := range pkg.Files {
 			c.fillImportMap(f, pkg.Pkg)
 			fn(f, pkg.Pkg)
 		}
-	}
+	})
 }
 
 // fillImportMap fills import map for f.
diff --git a/pkg/compiler/init_test.go b/pkg/compiler/init_test.go
new file mode 100644
index 000000000..dd74639ad
--- /dev/null
+++ b/pkg/compiler/init_test.go
@@ -0,0 +1,107 @@
+package compiler_test
+
+import (
+	"math/big"
+	"testing"
+
+	"github.com/stretchr/testify/require"
+)
+
+func TestInit(t *testing.T) {
+	t.Run("Simple", func(t *testing.T) {
+		src := `package foo
+		var a int
+		func init() {
+			a = 42
+		}
+		func Main() int {
+			return a
+		}`
+		eval(t, src, big.NewInt(42))
+	})
+	t.Run("Multi", func(t *testing.T) {
+		src := `package foo
+		var m = map[int]int{}
+		var a = 2
+		func init() {
+			m[1] = 11
+		}
+		func init() {
+			a = 1
+			m[3] = 30
+		}
+		func Main() int {
+			return m[1] + m[3] + a
+		}`
+		eval(t, src, big.NewInt(42))
+	})
+	t.Run("WithCall", func(t *testing.T) {
+		src := `package foo
+		var m = map[int]int{}
+		func init() {
+			initMap(m)
+		}
+		func initMap(m map[int]int) {
+			m[11] = 42
+		}
+		func Main() int {
+			return m[11]
+		}`
+		eval(t, src, big.NewInt(42))
+	})
+	t.Run("InvalidSignature", func(t *testing.T) {
+		src := `package foo
+		type Foo int
+		var a int
+		func (f Foo) init() {
+			a = 2
+		}
+		func Main() int {
+			return a
+		}`
+		eval(t, src, big.NewInt(0))
+	})
+}
+
+func TestImportOrder(t *testing.T) {
+	t.Run("1,2", func(t *testing.T) {
+		src := `package foo
+		import _ "github.com/nspcc-dev/neo-go/pkg/compiler/testdata/pkg1"
+		import _ "github.com/nspcc-dev/neo-go/pkg/compiler/testdata/pkg2"
+		import "github.com/nspcc-dev/neo-go/pkg/compiler/testdata/pkg3"
+		func Main() int { return pkg3.A }`
+		v := vmAndCompile(t, src)
+		v.PrintOps()
+		eval(t, src, big.NewInt(2))
+	})
+	t.Run("2,1", func(t *testing.T) {
+		src := `package foo
+		import _ "github.com/nspcc-dev/neo-go/pkg/compiler/testdata/pkg2"
+		import _ "github.com/nspcc-dev/neo-go/pkg/compiler/testdata/pkg1"
+		import "github.com/nspcc-dev/neo-go/pkg/compiler/testdata/pkg3"
+		func Main() int { return pkg3.A }`
+		eval(t, src, big.NewInt(1))
+	})
+	t.Run("InitializeOnce", func(t *testing.T) {
+		src := `package foo
+		import "github.com/nspcc-dev/neo-go/pkg/compiler/testdata/pkg3"
+		var A = pkg3.A
+		func Main() int { return A }`
+		eval(t, src, big.NewInt(3))
+	})
+}
+
+func TestInitWithNoGlobals(t *testing.T) {
+	src := `package foo
+	import "github.com/nspcc-dev/neo-go/pkg/interop/runtime"
+	func init() {
+		runtime.Notify("called in '_initialize'")
+	}
+	func Main() int {
+		return 42
+	}`
+	v, s := vmAndCompileInterop(t, src)
+	require.NoError(t, v.Run())
+	assertResult(t, v, big.NewInt(42))
+	require.True(t, len(s.events) == 1)
+}
diff --git a/pkg/compiler/testdata/pkg1/pkg1.go b/pkg/compiler/testdata/pkg1/pkg1.go
new file mode 100644
index 000000000..910eb0e45
--- /dev/null
+++ b/pkg/compiler/testdata/pkg1/pkg1.go
@@ -0,0 +1,7 @@
+package pkg1
+
+import "github.com/nspcc-dev/neo-go/pkg/compiler/testdata/pkg3"
+
+func init() {
+	pkg3.A = 1
+}
diff --git a/pkg/compiler/testdata/pkg2/pkg2.go b/pkg/compiler/testdata/pkg2/pkg2.go
new file mode 100644
index 000000000..e95cda011
--- /dev/null
+++ b/pkg/compiler/testdata/pkg2/pkg2.go
@@ -0,0 +1,9 @@
+package pkg2
+
+import (
+	"github.com/nspcc-dev/neo-go/pkg/compiler/testdata/pkg3"
+)
+
+func init() {
+	pkg3.A = 2
+}
diff --git a/pkg/compiler/testdata/pkg3/pkg3.go b/pkg/compiler/testdata/pkg3/pkg3.go
new file mode 100644
index 000000000..bf7c49a9e
--- /dev/null
+++ b/pkg/compiler/testdata/pkg3/pkg3.go
@@ -0,0 +1,7 @@
+package pkg3
+
+var A int
+
+func init() {
+	A = 3
+}