diff --git a/pkg/overlay/overlay-dirs.go b/pkg/overlay/overlay-dirs.go
index 249642f5..711d55d7 100644
--- a/pkg/overlay/overlay-dirs.go
+++ b/pkg/overlay/overlay-dirs.go
@@ -48,7 +48,7 @@ func generateOverlayDirLayer(name string, layerType types.LayerType, overlayDir
 	defer oci.Close()
 
 	contents := path.Join(config.RootFSDir, name, "overlay_dirs", path.Base(overlayDir.Source))
-	blob, mediaType, rootHash, err := generateBlob(layerType, contents, config.OCIDir)
+	blob, mediaType, rootHash, err := generateBlob(layerType, contents, config.OCIDir, true)
 	if err != nil {
 		return ispec.Descriptor{}, err
 	}
diff --git a/pkg/overlay/pack.go b/pkg/overlay/pack.go
index 3a6cc7d7..96cc4b92 100644
--- a/pkg/overlay/pack.go
+++ b/pkg/overlay/pack.go
@@ -135,7 +135,7 @@ func ConvertAndOutput(config types.StackerConfig, tag, name string, layerType ty
 		bundlePath := overlayPath(config.RootFSDir, theLayer.Digest)
 		overlayDir := path.Join(bundlePath, "overlay")
 		// generate blob
-		blob, mediaType, rootHash, err := generateBlob(layerType, overlayDir, config.OCIDir)
+		blob, mediaType, rootHash, err := generateBlob(layerType, overlayDir, config.OCIDir, false)
 		if err != nil {
 			return err
 		}
@@ -293,7 +293,7 @@ func (o *overlay) Repack(name string, layerTypes []types.LayerType, sfm types.St
 }
 
 // generateBlob generates either a tar blob or a squashfs blob based on layerType
-func generateBlob(layerType types.LayerType, contents string, ociDir string) (io.ReadCloser, string, string, error) {
+func generateBlob(layerType types.LayerType, contents string, ociDir string, compress bool) (io.ReadCloser, string, string, error) {
 	var blob io.ReadCloser
 	var err error
 	var mediaType string
@@ -301,7 +301,15 @@ func generateBlob(layerType types.LayerType, contents string, ociDir string) (io
 	if layerType.Type == "tar" {
 		packOptions := layer.RepackOptions{TranslateOverlayWhiteouts: true}
 		blob = layer.GenerateInsertLayer(contents, "/", false, &packOptions)
-		mediaType = ispec.MediaTypeImageLayer
+		if !compress {
+			mediaType = ispec.MediaTypeImageLayer
+		} else {
+			blob, err = mutate.GzipCompressor.WithOpt(gzipBlockSize).Compress(blob)
+			if err != nil {
+				return nil, "", "", err
+			}
+			mediaType = ispec.MediaTypeImageLayerGzip
+		}
 	} else {
 		blob, mediaType, rootHash, err = squashfs.MakeSquashfs(ociDir, contents, nil, layerType.Verity)
 		if err != nil {
@@ -435,7 +443,7 @@ func generateLayer(config types.StackerConfig, oci casext.Engine, mutators []*mu
 		mutator := mutators[i]
 		var desc ispec.Descriptor
 
-		blob, mediaType, rootHash, err := generateBlob(layerType, dir, config.OCIDir)
+		blob, mediaType, rootHash, err := generateBlob(layerType, dir, config.OCIDir, false)
 		if err != nil {
 			return false, err
 		}