diff --git a/src/compiler/ruby_generator.cc b/src/compiler/ruby_generator.cc
index e81dea603ba..c7af9c38fad 100644
--- a/src/compiler/ruby_generator.cc
+++ b/src/compiler/ruby_generator.cc
@@ -73,7 +73,7 @@ void PrintService(const ServiceDescriptor* service, const grpc::string& package,
   // Begin the service module
   std::map<grpc::string, grpc::string> module_vars = ListToDict({
       "module.name",
-      CapitalizeFirst(service->name()),
+      Modularize(service->name()),
   });
   out->Print(module_vars, "module $module.name$\n");
   out->Indent();
diff --git a/src/compiler/ruby_generator_string-inl.h b/src/compiler/ruby_generator_string-inl.h
index fb429784bb7..ecfe796e7a2 100644
--- a/src/compiler/ruby_generator_string-inl.h
+++ b/src/compiler/ruby_generator_string-inl.h
@@ -81,13 +81,23 @@ inline bool ReplacePrefix(grpc::string* s, const grpc::string& from,
   return true;
 }
 
-// CapitalizeFirst capitalizes the first char in a string.
-inline grpc::string CapitalizeFirst(grpc::string s) {
+// Modularize converts a string into a ruby module compatible name
+inline grpc::string Modularize(grpc::string s) {
   if (s.empty()) {
     return s;
   }
-  s[0] = ::toupper(s[0]);
-  return s;
+  grpc::string new_string = "";
+  bool was_last_underscore = false;
+  new_string.append(1, ::toupper(s[0]));
+  for (grpc::string::size_type i = 1; i < s.size(); ++i) {
+    if (was_last_underscore && s[i] != '_') {
+      new_string.append(1, ::toupper(s[i]));
+    } else if (s[i] != '_') {
+      new_string.append(1, s[i]);
+    }
+    was_last_underscore = s[i] == '_';
+  }
+  return new_string;
 }
 
 // RubyTypeOf updates a proto type to the required ruby equivalent.
@@ -106,7 +116,7 @@ inline grpc::string RubyTypeOf(const grpc::string& a_type,
         res += "::";  // switch '.' to the ruby module delim
       }
       if (i < prefixes_and_type.size() - 1) {
-        res += CapitalizeFirst(prefixes_and_type[i]);  // capitalize pkgs
+        res += Modularize(prefixes_and_type[i]);  // capitalize pkgs
       } else {
         res += prefixes_and_type[i];
       }
diff --git a/src/ruby/spec/pb/package_with_underscore/checker_spec.rb b/src/ruby/spec/pb/package_with_underscore/checker_spec.rb
new file mode 100644
index 00000000000..6155b3b9343
--- /dev/null
+++ b/src/ruby/spec/pb/package_with_underscore/checker_spec.rb
@@ -0,0 +1,54 @@
+# Copyright 2016 gRPC authors.
+#
+# Licensed under the Apache License, Version 2.0 (the "License");
+# you may not use this file except in compliance with the License.
+# You may obtain a copy of the License at
+#
+#     http://www.apache.org/licenses/LICENSE-2.0
+#
+# Unless required by applicable law or agreed to in writing, software
+# distributed under the License is distributed on an "AS IS" BASIS,
+# WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+# See the License for the specific language governing permissions and
+# limitations under the License.
+
+require 'open3'
+require 'tmpdir'
+
+def debug_mode?
+  !ENV['CONFIG'].nil? && ENV['CONFIG'] == 'dbg'
+end
+
+describe 'Package with underscore protobuf code generation' do
+  it 'should have the same content as created by code generation' do
+    root_dir = File.join(File.dirname(__FILE__), '..', '..', '..', '..', '..')
+    pb_dir = File.join(root_dir, 'src', 'ruby', 'spec', 'pb')
+
+    bins_sub_dir = debug_mode? ? 'dbg' : 'opt'
+    bins_dir = File.join(root_dir, 'bins', bins_sub_dir)
+
+    plugin = File.join(bins_dir, 'grpc_ruby_plugin')
+    protoc = File.join(bins_dir, 'protobuf', 'protoc')
+
+    got = nil
+
+    Dir.mktmpdir do |tmp_dir|
+      gen_out = File.join(tmp_dir, 'package_with_underscore', 'service_services_pb.rb')
+
+      pid = spawn(
+        protoc,
+        '-I.',
+        'package_with_underscore/service.proto',
+        "--grpc_out=#{tmp_dir}",
+        "--plugin=protoc-gen-grpc=#{plugin}",
+        chdir: pb_dir)
+      Process.waitpid2(pid)
+      File.open(gen_out) { |f| got = f.read }
+    end
+
+    correct_modularized_rpc = 'rpc :TestOne, '                \
+      'Grpc::Testing::PackageWithUnderscore::Data::Request, ' \
+      'Grpc::Testing::PackageWithUnderscore::Data::Response'
+    expect(got).to include(correct_modularized_rpc)
+  end
+end
diff --git a/src/ruby/spec/pb/package_with_underscore/data.proto b/src/ruby/spec/pb/package_with_underscore/data.proto
new file mode 100644
index 00000000000..2706f1d7be4
--- /dev/null
+++ b/src/ruby/spec/pb/package_with_underscore/data.proto
@@ -0,0 +1,23 @@
+// Copyright 2018 gRPC authors.
+//
+// Licensed under the Apache License, Version 2.0 (the "License");
+// you may not use this file except in compliance with the License.
+// You may obtain a copy of the License at
+//
+//     http://www.apache.org/licenses/LICENSE-2.0
+//
+// Unless required by applicable law or agreed to in writing, software
+// distributed under the License is distributed on an "AS IS" BASIS,
+// WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+// See the License for the specific language governing permissions and
+// limitations under the License.
+
+syntax = "proto3";
+
+package grpc.testing.package_with_underscore.data;
+
+message Request {
+}
+
+message Response {
+}
diff --git a/src/ruby/spec/pb/package_with_underscore/service.proto b/src/ruby/spec/pb/package_with_underscore/service.proto
new file mode 100644
index 00000000000..814c7898cda
--- /dev/null
+++ b/src/ruby/spec/pb/package_with_underscore/service.proto
@@ -0,0 +1,23 @@
+// Copyright 2018 gRPC authors.
+//
+// Licensed under the Apache License, Version 2.0 (the "License");
+// you may not use this file except in compliance with the License.
+// You may obtain a copy of the License at
+//
+//     http://www.apache.org/licenses/LICENSE-2.0
+//
+// Unless required by applicable law or agreed to in writing, software
+// distributed under the License is distributed on an "AS IS" BASIS,
+// WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+// See the License for the specific language governing permissions and
+// limitations under the License.
+
+syntax = "proto3";
+
+package grpc.testing.package_with_underscore.service;
+
+import "package_with_underscore/data.proto";
+
+service MyService {
+  rpc TestOne(data.Request) returns (data.Response) {}
+}
diff --git a/tools/run_tests/helper_scripts/run_ruby.sh b/tools/run_tests/helper_scripts/run_ruby.sh
index 4e9c212877a..03eaeb0ec7e 100755
--- a/tools/run_tests/helper_scripts/run_ruby.sh
+++ b/tools/run_tests/helper_scripts/run_ruby.sh
@@ -18,4 +18,7 @@ set -ex
 # change to grpc repo root
 cd "$(dirname "$0")/../../.."
 
+# build grpc_ruby_plugin
+make grpc_ruby_plugin -j8
+
 rake