diff --git a/yarn-project/p2p/src/services/tx_file_store/tx_file_store.test.ts b/yarn-project/p2p/src/services/tx_file_store/tx_file_store.test.ts
index e14f47a2b6dd..1a0ab6b19fde 100644
--- a/yarn-project/p2p/src/services/tx_file_store/tx_file_store.test.ts
+++ b/yarn-project/p2p/src/services/tx_file_store/tx_file_store.test.ts
@@ -9,6 +9,7 @@ import { tmpdir } from 'os';
 import { join } from 'path';
 
 import { InMemoryTxPool } from '../../test-helpers/testbench-utils.js';
+import { FileStoreTxSource } from '../tx_collection/file_store_tx_source.js';
 import type { TxFileStoreConfig } from './config.js';
 import { TxFileStore } from './tx_file_store.js';
 
@@ -103,7 +104,7 @@ describe('TxFileStore', () => {
       await txFileStore!.flush();
 
       expect(spy).toHaveBeenCalledWith(`${basePath}/txs/${tx.getTxHash().toString()}.bin`, tx.toBuffer(), {
-        compress: false,
+        compress: true,
       });
 
       spy.mockRestore();
@@ -148,7 +149,7 @@ describe('TxFileStore', () => {
       await txFileStore!.flush();
 
       expect(spy).toHaveBeenCalledWith(`${basePath}/txs/${tx.getTxHash().toString()}.bin`, tx.toBuffer(), {
-        compress: false,
+        compress: true,
       });
 
       spy.mockRestore();
@@ -328,4 +329,24 @@ describe('TxFileStore', () => {
       expect(txFileStore!.getPendingUploadCount()).toBe(0);
     });
   });
+
+  describe('compression round-trip', () => {
+    it('uploads compressed tx and reads it back via FileStoreTxSource', async () => {
+      txFileStore = await TxFileStore.create(txPool, config, basePath, log, undefined, fileStore);
+      txFileStore!.start();
+
+      const tx = await makeTx();
+      await txPool.addPendingTxs([tx]);
+      await txFileStore!.flush();
+
+      // Read back via FileStoreTxSource using the same local file store
+      const txSource = await FileStoreTxSource.create(`file://${tmpDir}`, basePath, log);
+      expect(txSource).toBeDefined();
+
+      const results = await txSource!.getTxsByHash([tx.getTxHash()]);
+      expect(results).toHaveLength(1);
+      expect(results[0]).toBeDefined();
+      expect(results[0]!.toBuffer()).toEqual(tx.toBuffer());
+    });
+  });
 });
diff --git a/yarn-project/p2p/src/services/tx_file_store/tx_file_store.ts b/yarn-project/p2p/src/services/tx_file_store/tx_file_store.ts
index 672bdd6d40cc..063c6256680f 100644
--- a/yarn-project/p2p/src/services/tx_file_store/tx_file_store.ts
+++ b/yarn-project/p2p/src/services/tx_file_store/tx_file_store.ts
@@ -146,7 +146,7 @@ export class TxFileStore {
       }
 
       await retry(
-        () => this.fileStore.save(path, tx.toBuffer(), { compress: false }),
+        () => this.fileStore.save(path, tx.toBuffer(), { compress: true }),
         `Uploading tx ${txHash}`,
         makeBackoff([0.1, 0.5, 2]),
         this.log,
diff --git a/yarn-project/stdlib/src/file-store/local.ts b/yarn-project/stdlib/src/file-store/local.ts
index e2c3409666ba..a01ade236dff 100644
--- a/yarn-project/stdlib/src/file-store/local.ts
+++ b/yarn-project/stdlib/src/file-store/local.ts
@@ -1,15 +1,21 @@
 import { access, mkdir, readFile, writeFile } from 'fs/promises';
 import { dirname, resolve } from 'path';
+import { promisify } from 'util';
+import { gunzip as gunzipCb, gzip as gzipCb } from 'zlib';
 
-import type { FileStore } from './interface.js';
+import type { FileStore, FileStoreSaveOptions } from './interface.js';
+
+const gzip = promisify(gzipCb);
+const gunzip = promisify(gunzipCb);
 
 export class LocalFileStore implements FileStore {
   constructor(private readonly basePath: string) {}
 
-  public async save(path: string, data: Buffer): Promise<string> {
+  public async save(path: string, data: Buffer, opts?: FileStoreSaveOptions): Promise<string> {
     const fullPath = this.getFullPath(path);
     await mkdir(dirname(fullPath), { recursive: true });
-    await writeFile(fullPath, data);
+    const toWrite = opts?.compress ? await gzip(data) : data;
+    await writeFile(fullPath, toWrite);
     return `file://${fullPath}`;
   }
 
@@ -18,9 +24,13 @@ export class LocalFileStore implements FileStore {
     return this.save(destPath, data);
   }
 
-  public read(pathOrUrlStr: string): Promise<Buffer> {
+  public async read(pathOrUrlStr: string): Promise<Buffer> {
     const fullPath = this.getFullPath(pathOrUrlStr);
-    return readFile(fullPath);
+    const data = await readFile(fullPath);
+    if (data.length >= 2 && data[0] === 0x1f && data[1] === 0x8b) {
+      return await gunzip(data);
+    }
+    return data;
   }
 
   public async download(pathOrUrlStr: string, destPath: string): Promise<void> {
diff --git a/yarn-project/stdlib/src/file-store/s3.ts b/yarn-project/stdlib/src/file-store/s3.ts
index 2033a1e86d9d..22d41347b4bc 100644
--- a/yarn-project/stdlib/src/file-store/s3.ts
+++ b/yarn-project/stdlib/src/file-store/s3.ts
@@ -13,10 +13,14 @@ import { tmpdir } from 'os';
 import { basename, dirname, join } from 'path';
 import { Readable } from 'stream';
 import { pipeline } from 'stream/promises';
-import { createGzip } from 'zlib';
+import { promisify } from 'util';
+import { createGzip, gunzip as gunzipCb, gzip as gzipCb } from 'zlib';
 
 import type { FileStore, FileStoreSaveOptions } from './interface.js';
 
+const gzip = promisify(gzipCb);
+const gunzip = promisify(gunzipCb);
+
 function normalizeBasePath(path: string): string {
   return path?.replace(/^\/+|\/+$/g, '') ?? '';
 }
@@ -52,7 +56,7 @@ export class S3FileStore implements FileStore {
     const key = this.getFullPath(path);
     const shouldCompress = !!opts.compress;
 
-    const body = shouldCompress ? (await import('zlib')).gzipSync(data) : data;
+    const body = shouldCompress ? await gzip(data) : data;
     const contentLength = body.length;
     const contentType = this.detectContentType(key, shouldCompress);
     const put = new PutObjectCommand({
@@ -60,6 +64,7 @@ export class S3FileStore implements FileStore {
       Key: key,
       Body: body,
       ContentType: contentType,
+      ContentEncoding: shouldCompress ? 'gzip' : undefined,
       CacheControl: opts.metadata?.['Cache-control'],
       Metadata: this.extractUserMetadata(opts.metadata),
       ContentLength: contentLength,
@@ -134,7 +139,11 @@ export class S3FileStore implements FileStore {
     for await (const chunk of stream) {
       chunks.push(Buffer.isBuffer(chunk) ? chunk : Buffer.from(chunk));
     }
-    return Buffer.concat(chunks);
+    const buffer = Buffer.concat(chunks);
+    if (out.ContentEncoding === 'gzip') {
+      return await gunzip(buffer);
+    }
+    return buffer;
   }
 
   public async download(pathOrUrlStr: string, destPath: string): Promise<void> {