After successfully deploying a test app using the steps outlined here: http://docs.aws.amazon.com/elasticbeanstalk/latest/dg/create_deploy_Python_flask.html
I tried
When I encountered this problem it was because I was using the GUI to upload a zip of my project files. Initially I was zipping the project level directory and uploading that zip to EB.
Then I switched to simply uploading a zip of the project files themselves-ie select all files and send those to a zip-and then the GUI upload utility was able to find my application.py file without a problem because the application.py file was not in a subfolder.