diff --git a/internal/osbuild2/files_input.go b/internal/osbuild2/files_input.go
index 5dad74b4b..785ca0eeb 100644
--- a/internal/osbuild2/files_input.go
+++ b/internal/osbuild2/files_input.go
@@ -21,6 +21,9 @@ func NewFilesInputs(references FilesInputReferences) *FilesInputs {
 
 // IMPLEMENTED INTERFACES OF STAGES ACCEPTING THIS INPUTS TYPE
 
+// inputs accepted by the XZ stage
+func (FilesInputs) isXzStageInputs() {}
+
 // SPECIFIC INPUT STRUCTURE
 
 type FilesInput struct {
diff --git a/internal/osbuild2/stage.go b/internal/osbuild2/stage.go
index 87ab877a5..8b47531f6 100644
--- a/internal/osbuild2/stage.go
+++ b/internal/osbuild2/stage.go
@@ -132,6 +132,12 @@ func (stage *Stage) UnmarshalJSON(data []byte) error {
 	case "org.osbuild.qemu":
 		options = new(QEMUStageOptions)
 		inputs = new(QEMUStageInputs)
+	case "org.osbuild.xz":
+		options = new(XzStageOptions)
+		// TODO: Unmarshalling inputs should be moved to a separate method and struct should be determined by its Type
+		// The stage accepts also source input, but we need to rework all inputs first to handle this nicely here.
+		// Only files input is used by the XZ stage at this moment.
+		inputs = new(FilesInputs)
 	default:
 		return fmt.Errorf("unexpected stage type: %s", rawStage.Type)
 	}
diff --git a/internal/osbuild2/stage_test.go b/internal/osbuild2/stage_test.go
index 60f87ba72..63428d5f1 100644
--- a/internal/osbuild2/stage_test.go
+++ b/internal/osbuild2/stage_test.go
@@ -589,6 +589,19 @@ func TestStageV2_UnmarshalJSON(t *testing.T) {
 				data: []byte(`{"type":"org.osbuild.ostree.preptree","options":{"etc_group_members":["wheel"]}}`),
 			},
 		},
+		{
+			name: "xz",
+			fields: fields{
+				Type: "org.osbuild.xz",
+				Options: &XzStageOptions{
+					Filename: "image.raw.xz",
+				},
+				Inputs: NewFilesInputs(NewFilesInputReferencesPipeline("os", "image.raw")),
+			},
+			args: args{
+				data: []byte(`{"type":"org.osbuild.xz","inputs":{"file":{"type":"org.osbuild.files","origin":"org.osbuild.pipeline","references":{"name:os":{"file":"image.raw"}}}},"options":{"filename":"image.raw.xz"}}`),
+			},
+		},
 	}
 	for idx, tt := range tests {
 		t.Run(tt.name, func(t *testing.T) {
diff --git a/internal/osbuild2/xz_stage.go b/internal/osbuild2/xz_stage.go
new file mode 100644
index 000000000..bf0fc8b2a
--- /dev/null
+++ b/internal/osbuild2/xz_stage.go
@@ -0,0 +1,32 @@
+package osbuild2
+
+type XzStageOptions struct {
+	// Filename for xz archive
+	Filename string `json:"filename"`
+}
+
+func (XzStageOptions) isStageOptions() {}
+
+func NewXzStageOptions(filename string) *XzStageOptions {
+	return &XzStageOptions{
+		Filename: filename,
+	}
+}
+
+type XzStageInputs interface {
+	isXzStageInputs()
+}
+
+// Compresses a file into a xz archive.
+func NewXzStage(options *XzStageOptions, inputs XzStageInputs) *Stage {
+	var stageInputs Inputs
+	if inputs != nil {
+		stageInputs = inputs.(Inputs)
+	}
+
+	return &Stage{
+		Type:    "org.osbuild.xz",
+		Options: options,
+		Inputs:  stageInputs,
+	}
+}
diff --git a/internal/osbuild2/xz_stage_test.go b/internal/osbuild2/xz_stage_test.go
new file mode 100644
index 000000000..addb8a0a5
--- /dev/null
+++ b/internal/osbuild2/xz_stage_test.go
@@ -0,0 +1,47 @@
+package osbuild2
+
+import (
+	"testing"
+
+	"github.com/stretchr/testify/assert"
+)
+
+func TestNewXzStageOptions(t *testing.T) {
+	filename := "image.raw.xz"
+
+	expectedOptions := &XzStageOptions{
+		Filename: filename,
+	}
+
+	actualOptions := NewXzStageOptions(filename)
+	assert.Equal(t, expectedOptions, actualOptions)
+}
+
+func TestNewXzStage(t *testing.T) {
+	inputFilename := "image.raw"
+	filename := "image.raw.xz"
+	pipeline := "os"
+
+	expectedStage := &Stage{
+		Type:    "org.osbuild.xz",
+		Options: NewXzStageOptions(filename),
+		Inputs:  NewFilesInputs(NewFilesInputReferencesPipeline(pipeline, inputFilename)),
+	}
+
+	actualStage := NewXzStage(NewXzStageOptions(filename),
+		NewFilesInputs(NewFilesInputReferencesPipeline(pipeline, inputFilename)))
+	assert.Equal(t, expectedStage, actualStage)
+}
+
+func TestNewXzStageNoInputs(t *testing.T) {
+	filename := "image.raw.xz"
+
+	expectedStage := &Stage{
+		Type:    "org.osbuild.xz",
+		Options: &XzStageOptions{Filename: filename},
+		Inputs:  nil,
+	}
+
+	actualStage := NewXzStage(&XzStageOptions{Filename: filename}, nil)
+	assert.Equal(t, expectedStage, actualStage)
+}