The answer is autoreload. See the following Line Magics.
In [1]: %load_ext autoreload
In [2]: %autoreload 2
In [3]: from foo import some_function
In [4]: some_function()
Out[4]: 42
In [5]: # open foo.py in an editor and change some_function to return 43
In [6]: some_function()
Out[6]: 43
This official page contains more details on autoreload.