diff --git a/core/Makefile b/core/Makefile
index 628a8de303..a2b93910ce 100644
--- a/core/Makefile
+++ b/core/Makefile
@@ -720,8 +720,12 @@ define build-systemtarball-target
 		$(INSTALLED_SYSTEMTARBALL_TARGET)
 endef
 
+ifndef SYSTEM_TARBALL_FORMAT
+    SYSTEM_TARBALL_FORMAT := bz2
+endif
+
 system_tar := $(PRODUCT_OUT)/system.tar
-INSTALLED_SYSTEMTARBALL_TARGET := $(system_tar).bz2
+INSTALLED_SYSTEMTARBALL_TARGET := $(system_tar).$(SYSTEM_TARBALL_FORMAT)
 $(INSTALLED_SYSTEMTARBALL_TARGET): PRIVATE_SYSTEM_TAR := $(system_tar)
 $(INSTALLED_SYSTEMTARBALL_TARGET): $(FS_GET_STATS) $(INTERNAL_SYSTEMIMAGE_FILES)
 	$(build-systemtarball-target)
diff --git a/tools/mktarball.sh b/tools/mktarball.sh
index ea1a8ed71b..3e3200649f 100755
--- a/tools/mktarball.sh
+++ b/tools/mktarball.sh
@@ -39,7 +39,14 @@ for f in ${subdirs} ${files} ; do
 done
 
 if [ $? -eq 0 ] ; then
-    bzip2 -c ${target_tar} > ${target_tarball}
+    case "${target_tarball}" in
+    *.bz2 )
+        bzip2 -c ${target_tar} > ${target_tarball}
+        ;;
+    *.gz )
+        gzip -c ${target_tar} > ${target_tarball}
+        ;;
+    esac
     success=$?
     [ $success -eq 0 ] || rm -f ${target_tarball}
     rm -f ${target_tar}