diff --git a/bin/disk-image-create b/bin/disk-image-create
index 943cf6c6d..eee85c011 100755
--- a/bin/disk-image-create
+++ b/bin/disk-image-create
@@ -102,7 +102,7 @@ function show_options () {
     echo "Options:"
     echo "    -a i386|amd64|armhf -- set the architecture of the image(default amd64)"
     echo "    -o imagename -- set the imagename of the output image file(default image)"
-    echo "    -t qcow2,tar,vhd,docker,aci,raw -- set the image types of the output image files (default qcow2)"
+    echo "    -t qcow2,tar,tgz,vhd,docker,aci,raw -- set the image types of the output image files (default qcow2)"
     echo "       File types should be comma separated. VHD outputting requires the vhd-util"
     echo "       executable be in your PATH. ACI outputting requires the ACI_MANIFEST "
     echo "       environment variable be a path to a manifest file."
@@ -258,6 +258,10 @@ for X in ${!IMAGE_TYPES[@]}; do
                 exit 1
             fi
             ;;
+        tgz)
+            # Force tar to be created.
+            IMAGE_TYPES+=('tar')
+            ;;
         vhd)
             if [ -z "$(which vhd-util)" ]; then
                 echo "vhd output format specified but no vhd-util executable found."
diff --git a/doc/source/user_guide/building_an_image.rst b/doc/source/user_guide/building_an_image.rst
index 16dccc110..a401a96f6 100644
--- a/doc/source/user_guide/building_an_image.rst
+++ b/doc/source/user_guide/building_an_image.rst
@@ -51,6 +51,7 @@ formats are:
 
  * qcow2
  * tar
+ * tgz
  * vhd
  * docker
  * raw
diff --git a/lib/img-functions b/lib/img-functions
index f64a95a53..6ba0dfe45 100644
--- a/lib/img-functions
+++ b/lib/img-functions
@@ -122,6 +122,9 @@ function compress_and_save_image () {
     fi
     if [ "$IMAGE_TYPE" = "raw" ]; then
         mv $TMP_IMAGE_PATH $1-new
+    elif [ "$IMAGE_TYPE" == "tgz" ]; then
+        gzip -9 < $IMAGE_NAME.tar > $1-new
+        rm $IMAGE_NAME.tar
     elif [ "$IMAGE_TYPE" == "vhd" ]; then
         cp $TMP_IMAGE_PATH $1-intermediate
         vhd-util convert -s 0 -t 1 -i $1-intermediate -o $1-intermediate
diff --git a/tests/run_output_format_test.sh b/tests/run_output_format_test.sh
index b2f435ad4..6d0f21c7f 100755
--- a/tests/run_output_format_test.sh
+++ b/tests/run_output_format_test.sh
@@ -59,7 +59,7 @@ function build_test_image() {
     fi
 }
 
-test_formats="tar raw qcow2 docker aci"
+test_formats="tar tgz raw qcow2 docker aci"
 for binary in qemu-img docker ; do
     if [ -z "$(which $binary)" ]; then
         echo "Warning: No $binary binary found, cowardly refusing to run tests."