diff --git a/snapshot/policy/compression_policy.go b/snapshot/policy/compression_policy.go
index 4b9e93747..4c7822720 100644
--- a/snapshot/policy/compression_policy.go
+++ b/snapshot/policy/compression_policy.go
@@ -30,7 +30,7 @@ type CompressionPolicyDefinition struct {
 }
 
 // CompressorForFile returns compression name to be used for compressing a given file according to policy, using attributes such as name or size.
-func (p *CompressionPolicy) CompressorForFile(e fs.File) compression.Name {
+func (p *CompressionPolicy) CompressorForFile(e fs.Entry) compression.Name {
 	ext := filepath.Ext(e.Name())
 	size := e.Size()
 
diff --git a/snapshot/snapshotfs/upload.go b/snapshot/snapshotfs/upload.go
index d615eb003..f626a670a 100644
--- a/snapshot/snapshotfs/upload.go
+++ b/snapshot/snapshotfs/upload.go
@@ -336,7 +336,7 @@ func (u *Uploader) uploadSymlinkInternal(ctx context.Context, relativePath strin
 	return de, nil
 }
 
-func (u *Uploader) uploadStreamingFileInternal(ctx context.Context, relativePath string, f fs.StreamingFile) (dirEntry *snapshot.DirEntry, ret error) {
+func (u *Uploader) uploadStreamingFileInternal(ctx context.Context, relativePath string, f fs.StreamingFile, pol *policy.Policy) (dirEntry *snapshot.DirEntry, ret error) {
 	reader, err := f.GetReader(ctx)
 	if err != nil {
 		return nil, errors.Wrap(err, "unable to get streaming file reader")
@@ -353,9 +353,12 @@ func (u *Uploader) uploadStreamingFileInternal(ctx context.Context, relativePath
 		u.Progress.FinishedFile(relativePath, ret)
 	}()
 
+	comp := pol.CompressionPolicy.CompressorForFile(f)
 	writer := u.repo.NewObjectWriter(ctx, object.WriterOptions{
 		Description: "STREAMFILE:" + f.Name(),
+		Compressor:  comp,
 	})
+
 	defer writer.Close() //nolint:errcheck
 
 	written, err := u.copyWithProgress(writer, reader)
@@ -919,7 +922,7 @@ func (u *Uploader) processSingle(
 	case fs.StreamingFile:
 		atomic.AddInt32(&u.stats.NonCachedFiles, 1)
 
-		de, err := u.uploadStreamingFileInternal(ctx, entryRelativePath, entry)
+		de, err := u.uploadStreamingFileInternal(ctx, entryRelativePath, entry, policyTree.Child(entry.Name()).EffectivePolicy())
 
 		return u.processEntryUploadResult(ctx, de, err, entryRelativePath, parentDirBuilder,
 			policyTree.EffectivePolicy().ErrorHandlingPolicy.IgnoreFileErrors.OrDefault(false),
diff --git a/snapshot/snapshotfs/upload_test.go b/snapshot/snapshotfs/upload_test.go
index fbb026c82..01a262b4f 100644
--- a/snapshot/snapshotfs/upload_test.go
+++ b/snapshot/snapshotfs/upload_test.go
@@ -873,6 +873,42 @@ func TestUpload_VirtualDirectoryWithStreamingFile(t *testing.T) {
 	}
 }
 
+func TestUpload_VirtualDirectoryWithStreamingFile_WithCompression(t *testing.T) {
+	ctx := testlogging.Context(t)
+	th := newUploadTestHarness(ctx, t)
+
+	defer th.cleanup()
+
+	u := NewUploader(th.repo)
+
+	pol := *policy.DefaultPolicy
+	pol.CompressionPolicy.CompressorName = "pgzip"
+
+	policyTree := policy.BuildTree(nil, &pol)
+
+	// Create a temporary file with test data. Want something compressible but
+	// small so we don't trigger dedupe.
+	content := []byte(strings.Repeat("a", 4096))
+	r := io.NopCloser(bytes.NewReader(content))
+
+	staticRoot := virtualfs.NewStaticDirectory("rootdir", []fs.Entry{
+		virtualfs.StreamingFileFromReader("stream-file", r),
+	})
+
+	man, err := u.Upload(ctx, staticRoot, policyTree, snapshot.SourceInfo{})
+	require.NoError(t, err)
+
+	assert.Equal(t, int32(0), atomic.LoadInt32(&man.Stats.CachedFiles), "cached file count")
+	assert.Equal(t, int32(1), atomic.LoadInt32(&man.Stats.NonCachedFiles), "non-cached file count")
+	assert.Equal(t, int32(1), atomic.LoadInt32(&man.Stats.TotalDirectoryCount), "directory count")
+	assert.Equal(t, int32(1), atomic.LoadInt32(&man.Stats.TotalFileCount), "total file count")
+
+	// Write out pending data so the below size check compares properly.
+	require.NoError(t, th.repo.Flush(ctx), "flushing repo")
+
+	assert.Less(t, testutil.MustGetTotalDirSize(t, th.repoDir), int64(14000))
+}
+
 func TestUpload_VirtualDirectoryWithStreamingFileWithModTime(t *testing.T) {
 	content := []byte("Streaming Temporary file content")
 	mt := time.Date(2021, 1, 2, 3, 4, 5, 0, time.UTC)