diff --git a/diskimage_builder/lib/disk-image-create b/diskimage_builder/lib/disk-image-create
index 3d3996d7..1de310cb 100644
--- a/diskimage_builder/lib/disk-image-create
+++ b/diskimage_builder/lib/disk-image-create
@@ -123,6 +123,7 @@ DIB_DEBUG_TRACE=${DIB_DEBUG_TRACE:-0}
 INSTALL_PACKAGES=""
 IMAGE_TYPES=("qcow2")
 COMPRESS_IMAGE="true"
+DIB_GZIP_BIN=${DIB_GZIP_BIN:-"gzip"}
 ROOT_LABEL=""
 DIB_DEFAULT_INSTALLTYPE=${DIB_DEFAULT_INSTALLTYPE:-"source"}
 MKFS_OPTS=""
diff --git a/diskimage_builder/lib/img-functions b/diskimage_builder/lib/img-functions
index f158ee95..fa75d7c9 100644
--- a/diskimage_builder/lib/img-functions
+++ b/diskimage_builder/lib/img-functions
@@ -144,7 +144,7 @@ function compress_and_save_image () {
     if [ "$IMAGE_TYPE" = "raw" ]; then
         mv $TMP_IMAGE_PATH $1-new
     elif [ "$IMAGE_TYPE" == "tgz" ]; then
-        gzip -9 < $IMAGE_NAME.tar > $1-new
+        $DIB_GZIP_BIN -9 < $IMAGE_NAME.tar > $1-new
         rm $IMAGE_NAME.tar
     elif [ "$IMAGE_TYPE" == "vhd" ]; then
         cp $TMP_IMAGE_PATH $1-intermediate
diff --git a/doc/source/user_guide/building_an_image.rst b/doc/source/user_guide/building_an_image.rst
index 14aaee9e..67de29ef 100644
--- a/doc/source/user_guide/building_an_image.rst
+++ b/doc/source/user_guide/building_an_image.rst
@@ -57,6 +57,9 @@ formats are:
  * docker
  * raw
 
+When building a tgz image, note that the `DIB_GZIP_BIN` environment variable
+can be used to set the path of the gzip executable.
+
 Disk Image Layout
 -----------------
 
diff --git a/releasenotes/notes/gzip-env-variable-94e61e0c043f4f1f.yaml b/releasenotes/notes/gzip-env-variable-94e61e0c043f4f1f.yaml
new file mode 100644
index 00000000..97e0c653
--- /dev/null
+++ b/releasenotes/notes/gzip-env-variable-94e61e0c043f4f1f.yaml
@@ -0,0 +1,5 @@
+---
+features:
+  - |
+    The `DIB_GZIP_BIN` environment variable enables builders to change the
+    path to `gzip`, such as when an alternate gzip is to be used (ie. pigz).