diff --git a/docs/4-user-guide/1-the-zarf-cli/100-cli-commands/zarf_tools_archiver_decompress.md b/docs/4-user-guide/1-the-zarf-cli/100-cli-commands/zarf_tools_archiver_decompress.md
index f6b4385aed..62d1f900c6 100644
--- a/docs/4-user-guide/1-the-zarf-cli/100-cli-commands/zarf_tools_archiver_decompress.md
+++ b/docs/4-user-guide/1-the-zarf-cli/100-cli-commands/zarf_tools_archiver_decompress.md
@@ -10,7 +10,8 @@ zarf tools archiver decompress {ARCHIVE} {DESTINATION} [flags]
 ## Options
 
 ```
-  -h, --help   help for decompress
+      --decompress-all   Decompress all layers in the archive
+  -h, --help             help for decompress
 ```
 
 ## Options inherited from parent commands
diff --git a/src/cmd/tools.go b/src/cmd/tools.go
index 1e97df1943..76eaf45bbf 100644
--- a/src/cmd/tools.go
+++ b/src/cmd/tools.go
@@ -6,6 +6,8 @@ package cmd
 
 import (
 	"os"
+	"path/filepath"
+	"strings"
 
 	"github.com/anchore/syft/cmd/syft/cli"
 	"github.com/defenseunicorns/zarf/src/config"
@@ -22,6 +24,7 @@ import (
 )
 
 var subAltNames []string
+var decompressLayers bool
 
 var toolsCmd = &cobra.Command{
 	Use:     "tools",
@@ -64,6 +67,23 @@ var archiverDecompressCmd = &cobra.Command{
 		if err != nil {
 			message.Fatal(err, lang.CmdToolsArchiverDecompressErr)
 		}
+
+		// Decompress component layers in the destination path
+		if decompressLayers {
+			layersDir := filepath.Join(destinationPath, "components")
+
+			files, err := os.ReadDir(layersDir)
+			if err != nil {
+				message.Fatalf(err, "failed to read the layers of components")
+			}
+			for _, file := range files {
+				if strings.HasSuffix(file.Name(), "tar.zst") {
+					if err := archiver.Unarchive(filepath.Join(layersDir, file.Name()), layersDir); err != nil {
+						message.Fatalf(err, "failed to decompress the component layer")
+					}
+				}
+			}
+		}
 	},
 }
 
@@ -173,6 +193,7 @@ func init() {
 
 	archiverCmd.AddCommand(archiverCompressCmd)
 	archiverCmd.AddCommand(archiverDecompressCmd)
+	archiverDecompressCmd.Flags().BoolVar(&decompressLayers, "decompress-all", false, "Decompress all layers in the archive")
 
 	cranePlatformOptions := config.GetCraneOptions(false)
 
diff --git a/src/pkg/packager/common.go b/src/pkg/packager/common.go
index 6a46eb2ff1..a756463e22 100644
--- a/src/pkg/packager/common.go
+++ b/src/pkg/packager/common.go
@@ -205,6 +205,24 @@ func (p *Packager) loadZarfPkg() error {
 		return fmt.Errorf("unable to read the zarf.yaml in %s: %w", p.tmp.Base, err)
 	}
 
+	// Get a list of paths for the components of the package
+	components, err := os.ReadDir(p.tmp.Components)
+	if err != nil {
+		return fmt.Errorf("unable to get a list of components... %w", err)
+	}
+	for _, component := range components {
+		// If the components are compressed tarballs, un-compress them
+		componentPath := filepath.Join(p.tmp.Components, component.Name())
+		if !component.IsDir() && strings.HasSuffix(component.Name(), ".tar.zst") {
+			if err := archiver.Unarchive(componentPath, p.tmp.Components); err != nil {
+				return fmt.Errorf("unable to extract the component: %w", err)
+			}
+
+			// After extracting the component, remove the compressed tarball to release disk space
+			_ = os.Remove(filepath.Join(p.tmp.Components, component.Name()))
+		}
+	}
+
 	// If SBOM files exist, temporarily place them in the deploy directory
 	if err := sbom.OutputSBOMFiles(p.tmp, config.ZarfSBOMDir, ""); err != nil {
 		// Don't stop the deployment, let the user decide if they want to continue the deployment
diff --git a/src/pkg/packager/create.go b/src/pkg/packager/create.go
index d4641844f8..ab2fcd5633 100644
--- a/src/pkg/packager/create.go
+++ b/src/pkg/packager/create.go
@@ -164,6 +164,23 @@ func (p *Packager) Create(baseDir string) error {
 		sbom.Catalog(componentSBOMs, imgList, p.tmp.Images, p.tmp.Sboms)
 	}
 
+	// Process the component directories into compressed tarballs
+	// NOTE: This is purposefully being done after the SBOM cataloging
+	for _, component := range p.cfg.Pkg.Components {
+		// Make the component a tar.zst archive
+		componentPaths, _ := p.createComponentPaths(component)
+		componentName := fmt.Sprintf("%s.%s", component.Name, "tar.zst")
+		componentTarPath := filepath.Join(p.tmp.Components, componentName)
+		if err := archiver.Archive([]string{componentPaths.Base}, componentTarPath); err != nil {
+			return fmt.Errorf("unable to create package: %w", err)
+		}
+
+		// Remove the deflated component directory
+		if err := os.RemoveAll(componentPaths.Base); err != nil {
+			message.Debugf("unable to remove the component directory (%s): %s", componentPaths.Base, err.Error())
+		}
+	}
+
 	// In case the directory was changed, reset to prevent breaking relative target paths
 	if originalDir != "" {
 		_ = os.Chdir(originalDir)
diff --git a/src/test/e2e/04_create_templating_test.go b/src/test/e2e/04_create_templating_test.go
index 41e5b7ea19..e49907e2f3 100644
--- a/src/test/e2e/04_create_templating_test.go
+++ b/src/test/e2e/04_create_templating_test.go
@@ -36,7 +36,7 @@ func TestCreateTemplating(t *testing.T) {
 	stdOut, stdErr, err := e2e.execZarfCommand("package", "create", "examples/package-variables", "--set", "CONFIG_MAP=simple-configmap.yaml", "--set", "ACTION=template", "--confirm", "--zarf-cache", cachePath)
 	require.NoError(t, err, stdOut, stdErr)
 
-	stdOut, stdErr, err = e2e.execZarfCommand("t", "archiver", "decompress", pkgName, decompressPath)
+	stdOut, stdErr, err = e2e.execZarfCommand("t", "archiver", "decompress", pkgName, decompressPath, "--decompress-all", "-l=trace")
 	require.NoError(t, err, stdOut, stdErr)
 
 	// Check that the configmap exists and is readable
diff --git a/src/test/e2e/22_git_and_flux_test.go b/src/test/e2e/22_git_and_flux_test.go
index 16552f2691..07195f99a6 100644
--- a/src/test/e2e/22_git_and_flux_test.go
+++ b/src/test/e2e/22_git_and_flux_test.go
@@ -162,7 +162,7 @@ func testRemovingTagsOnCreate(t *testing.T) {
 
 	// Extract the built package so we can inspect the repositories that are included
 	extractedDirPath := "tmp-extraction"
-	stdOut, stdErr, err := e2e.execZarfCommand("tools", "archiver", "decompress", testPackagePath, extractedDirPath, "-l=trace")
+	stdOut, stdErr, err := e2e.execZarfCommand("tools", "archiver", "decompress", testPackagePath, extractedDirPath, "-l=trace", "--decompress-all")
 	defer e2e.cleanFiles(extractedDirPath)
 	require.NoError(t, err, stdOut, stdErr)