diff --git a/elements/centos/root.d/10-centos6-cloud-image b/elements/centos/root.d/10-centos6-cloud-image
index e6e1d67e..8ff36493 100755
--- a/elements/centos/root.d/10-centos6-cloud-image
+++ b/elements/centos/root.d/10-centos6-cloud-image
@@ -24,7 +24,7 @@ if [ -n "$DIB_LOCAL_IMAGE" ]; then
     BASE_IMAGE_TAR=$BASE_IMAGE_FILE.tgz
 else
     DIB_CLOUD_IMAGES=${DIB_CLOUD_IMAGES:-http://cloud.centos.org/centos/6/images}
-    BASE_IMAGE_FILE=${BASE_IMAGE_FILE:-CentOS-6-x86_64-$DIB_RELEASE.qcow2}
+    BASE_IMAGE_FILE=${BASE_IMAGE_FILE:-CentOS-6-x86_64-$DIB_RELEASE.qcow2.xz}
     BASE_IMAGE_TAR=$BASE_IMAGE_FILE.tgz
     IMAGE_LOCATION=$DIB_CLOUD_IMAGES/$BASE_IMAGE_FILE
     CACHED_IMAGE=$DIB_IMAGE_CACHE/$BASE_IMAGE_FILE
diff --git a/elements/centos7/root.d/10-centos7-cloud-image b/elements/centos7/root.d/10-centos7-cloud-image
index d1ef4b83..cd79a418 100755
--- a/elements/centos7/root.d/10-centos7-cloud-image
+++ b/elements/centos7/root.d/10-centos7-cloud-image
@@ -28,7 +28,7 @@ if [ -n "$DIB_LOCAL_IMAGE" ]; then
 else
     DIB_RELEASE=${DIB_RELEASE:-GenericCloud}
     DIB_CLOUD_IMAGES=${DIB_CLOUD_IMAGES:-http://cloud.centos.org/centos/7/images}
-    BASE_IMAGE_FILE=${BASE_IMAGE_FILE:-CentOS-7-x86_64-$DIB_RELEASE.qcow2}
+    BASE_IMAGE_FILE=${BASE_IMAGE_FILE:-CentOS-7-x86_64-$DIB_RELEASE.qcow2.xz}
     BASE_IMAGE_TAR=$BASE_IMAGE_FILE.tgz
     IMAGE_LOCATION=$DIB_CLOUD_IMAGES/$BASE_IMAGE_FILE
     CACHED_IMAGE=$DIB_IMAGE_CACHE/$BASE_IMAGE_FILE
diff --git a/elements/redhat-common/README.rst b/elements/redhat-common/README.rst
index 912cc2d6..7b3143c7 100644
--- a/elements/redhat-common/README.rst
+++ b/elements/redhat-common/README.rst
@@ -3,6 +3,13 @@ redhat-common
 =============
 Image installation steps common to RHEL, CentOS, and Fedora.
 
+Requirements:
+
+If used to build an image form a cloud image compress with xz
+(the default in centos), this element uses "unxz" to decompress
+the image. Depending on your distro you may need to install either
+the xz or xz-utils package.
+
 Overrides:
 
 DIB_LOCAL_IMAGE
diff --git a/elements/redhat-common/bin/extract-image b/elements/redhat-common/bin/extract-image
index 496db17f..1dec0368 100755
--- a/elements/redhat-common/bin/extract-image
+++ b/elements/redhat-common/bin/extract-image
@@ -50,6 +50,13 @@ function extract_image() {
 
             RAW_FILE=$(mktemp --tmpdir=$WORKING XXXXXX.raw)
 
+            if [ "${CACHED_IMAGE: -3}" == ".xz" ] ; then
+                QCOW2_FILE=$(mktemp --tmpdir=$WORKING XXXXXX.qcow2)
+                # This leaves the old image in place so cache-url wont get it again
+                unxz --stdout $CACHED_IMAGE > $QCOW2_FILE
+                CACHED_IMAGE=$QCOW2_FILE
+            fi
+
             qemu-img convert -f qcow2 -O raw $CACHED_IMAGE $RAW_FILE
 
             ROOT_PARTITON=p$(sudo kpartx -l $RAW_FILE | awk "/loop[0-9]+p/"|wc -l)