diff --git a/crates/handlers/src/compat/login.rs b/crates/handlers/src/compat/login.rs
index ff74bf8ef..75834f9b3 100644
--- a/crates/handlers/src/compat/login.rs
+++ b/crates/handlers/src/compat/login.rs
@@ -386,10 +386,13 @@ async fn user_password_login(
     username: String,
     password: String,
 ) -> Result<(CompatSession, User), RouteError> {
+    // Try getting the localpart out of the MXID
+    let username = homeserver.localpart(&username).unwrap_or(&username);
+
     // Find the user
     let user = repo
         .user()
-        .find_by_username(&username)
+        .find_by_username(username)
         .await?
         .filter(mas_data_model::User::is_valid)
         .ok_or(RouteError::UserNotFound)?;
@@ -539,23 +542,25 @@ mod tests {
         assert_eq!(body["errcode"], "M_UNRECOGNIZED");
     }
 
-    /// Test that a user can login with a password using the Matrix
-    /// compatibility API.
-    #[sqlx::test(migrator = "mas_storage_pg::MIGRATOR")]
-    async fn test_user_password_login(pool: PgPool) {
-        setup();
-        let state = TestState::from_pool(pool).await.unwrap();
-
-        // Let's provision a user and add a password to it. This part is hard to test
-        // with just HTTP requests, so we'll use the repository directly.
+    async fn user_with_password(state: &TestState, username: &str, password: &str) {
+        let mut rng = state.rng();
         let mut repo = state.repository().await.unwrap();
 
         let user = repo
             .user()
-            .add(&mut state.rng(), &state.clock, "alice".to_owned())
+            .add(&mut rng, &state.clock, username.to_owned())
+            .await
+            .unwrap();
+        let (version, hash) = state
+            .password_manager
+            .hash(&mut rng, Zeroizing::new(password.as_bytes().to_vec()))
             .await
             .unwrap();
 
+        repo.user_password()
+            .add(&mut rng, &state.clock, &user, version, hash, None)
+            .await
+            .unwrap();
         let mxid = state.homeserver_connection.mxid(&user.username);
         state
             .homeserver_connection
@@ -563,28 +568,17 @@ mod tests {
             .await
             .unwrap();
 
-        let (version, hashed_password) = state
-            .password_manager
-            .hash(
-                &mut state.rng(),
-                Zeroizing::new("password".to_owned().into_bytes()),
-            )
-            .await
-            .unwrap();
-
-        repo.user_password()
-            .add(
-                &mut state.rng(),
-                &state.clock,
-                &user,
-                version,
-                hashed_password,
-                None,
-            )
-            .await
-            .unwrap();
-
         repo.save().await.unwrap();
+    }
+
+    /// Test that a user can login with a password using the Matrix
+    /// compatibility API.
+    #[sqlx::test(migrator = "mas_storage_pg::MIGRATOR")]
+    async fn test_user_password_login(pool: PgPool) {
+        setup();
+        let state = TestState::from_pool(pool).await.unwrap();
+
+        user_with_password(&state, "alice", "password").await;
 
         // Now let's try to login with the password, without asking for a refresh token.
         let request = Request::post("/_matrix/client/v3/login").json(serde_json::json!({
@@ -662,6 +656,50 @@ mod tests {
         assert_eq!(body, old_body);
     }
 
+    /// Test that a user can login with a password using the Matrix
+    /// compatibility API, using a MXID as identifier
+    #[sqlx::test(migrator = "mas_storage_pg::MIGRATOR")]
+    async fn test_user_password_login_mxid(pool: PgPool) {
+        setup();
+        let state = TestState::from_pool(pool).await.unwrap();
+
+        user_with_password(&state, "alice", "password").await;
+
+        // Login with a full MXID as identifier
+        let request = Request::post("/_matrix/client/v3/login").json(serde_json::json!({
+            "type": "m.login.password",
+            "identifier": {
+                "type": "m.id.user",
+                "user": "@alice:example.com",
+            },
+            "password": "password",
+        }));
+
+        let response = state.request(request).await;
+        response.assert_status(StatusCode::OK);
+        let body: ResponseBody = response.json();
+        assert!(!body.access_token.is_empty());
+        assert_eq!(body.device_id.as_ref().unwrap().as_str().len(), 10);
+        assert_eq!(body.user_id, "@alice:example.com");
+        assert_eq!(body.refresh_token, None);
+        assert_eq!(body.expires_in_ms, None);
+
+        // With a MXID, but with the wrong server name
+        let request = Request::post("/_matrix/client/v3/login").json(serde_json::json!({
+            "type": "m.login.password",
+            "identifier": {
+                "type": "m.id.user",
+                "user": "@alice:something.corp",
+            },
+            "password": "password",
+        }));
+
+        let response = state.request(request).await;
+        response.assert_status(StatusCode::FORBIDDEN);
+        let body: serde_json::Value = response.json();
+        assert_eq!(body["errcode"], "M_FORBIDDEN");
+    }
+
     /// Test that password logins are rate limited.
     #[sqlx::test(migrator = "mas_storage_pg::MIGRATOR")]
     async fn test_password_login_rate_limit(pool: PgPool) {