diff --git a/README.md b/README.md
index 0f72fb99..e83bfa9d 100644
--- a/README.md
+++ b/README.md
@@ -1,4 +1,4 @@
-> This readme is for babel-loader v8 + Babel v7  
+> This readme is for babel-loader v8 + Babel v7
 > Check the [7.x branch](https://github.com/babel/babel-loader/tree/7.x) for docs with Babel v6
 
 [![NPM Status](https://img.shields.io/npm/v/babel-loader.svg?style=flat)](https://www.npmjs.com/package/babel-loader)
@@ -88,6 +88,8 @@ This loader also supports the following loader-specific option:
 
 * `cacheIdentifier`: Default is a string composed by the babel-core's version, the babel-loader's version, the contents of .babelrc file if it exists and the value of the environment variable `BABEL_ENV` with a fallback to the `NODE_ENV` environment variable. This can be set to a custom value to force cache busting if the identifier changes.
 
+* `cacheCompression`: Default `true`. When set, each Babel transform output will be compressed with Gzip. If you want to opt-out of cache compression, set it to `false` -- your project may benefit from this if it transpiles thousands of files.
+
 __Note:__ The `sourceMap` option is ignored, instead sourceMaps are automatically enabled when webpack is configured to use them (via the `devtool` config option).
 
 ## Troubleshooting
diff --git a/src/cache.js b/src/cache.js
index 24b44143..74e577db 100644
--- a/src/cache.js
+++ b/src/cache.js
@@ -32,11 +32,11 @@ const mkdirp = promisify(mkdirpOrig);
  * @async
  * @params {String} filename
  */
-const read = async function(filename) {
-  const data = await readFile(filename);
-  const content = await gunzip(data);
+const read = async function(filename, compress) {
+  const data = await readFile(filename + (compress ? ".gz" : ""));
+  const content = compress ? await gunzip(data) : data;
 
-  return JSON.parse(content);
+  return JSON.parse(content.toString());
 };
 
 /**
@@ -46,11 +46,11 @@ const read = async function(filename) {
  * @params {String} filename
  * @params {String} result
  */
-const write = async function(filename, result) {
+const write = async function(filename, compress, result) {
   const content = JSON.stringify(result);
 
-  const data = await gzip(content);
-  return await writeFile(filename, data);
+  const data = compress ? await gzip(content) : content;
+  return await writeFile(filename + (compress ? ".gz" : ""), data);
 };
 
 /**
@@ -68,7 +68,7 @@ const filename = function(source, identifier, options) {
 
   hash.update(contents);
 
-  return hash.digest("hex") + ".json.gz";
+  return hash.digest("hex") + ".json";
 };
 
 /**
@@ -78,14 +78,20 @@ const filename = function(source, identifier, options) {
  * @params {Object} params
  */
 const handleCache = async function(directory, params) {
-  const { source, options = {}, cacheIdentifier, cacheDirectory } = params;
+  const {
+    source,
+    options = {},
+    cacheIdentifier,
+    cacheDirectory,
+    cacheCompression,
+  } = params;
 
   const file = path.join(directory, filename(source, cacheIdentifier, options));
 
   try {
     // No errors mean that the file was previously cached
     // we just need to return it
-    return await read(file);
+    return await read(file, cacheCompression);
   } catch (err) {}
 
   const fallback =
@@ -107,7 +113,7 @@ const handleCache = async function(directory, params) {
   const result = await transform(source, options);
 
   try {
-    await write(file, result);
+    await write(file, cacheCompression, result);
   } catch (err) {
     if (fallback) {
       // Fallback to tmpdir if node_modules folder not writable
@@ -138,6 +144,7 @@ const handleCache = async function(directory, params) {
  *   cache({
  *     directory: '.tmp/cache',
  *     identifier: 'babel-loader-cachefile',
+ *     cacheCompression: false,
  *     source: *source code from file*,
  *     options: {
  *       experimental: true,
diff --git a/src/index.js b/src/index.js
index f1949f6b..9932b012 100644
--- a/src/index.js
+++ b/src/index.js
@@ -94,6 +94,7 @@ async function loader(source, inputSourceMap, overrides) {
   // Remove loader related options
   delete programmaticOptions.cacheDirectory;
   delete programmaticOptions.cacheIdentifier;
+  delete programmaticOptions.cacheCompression;
   delete programmaticOptions.metadataSubscribers;
 
   if (!babel.loadPartialConfig) {
@@ -121,6 +122,7 @@ async function loader(source, inputSourceMap, overrides) {
         "@babel/core": transform.version,
         "@babel/loader": pkg.version,
       }),
+      cacheCompression = true,
       metadataSubscribers = [],
     } = loaderOptions;
 
@@ -132,6 +134,7 @@ async function loader(source, inputSourceMap, overrides) {
         transform,
         cacheDirectory,
         cacheIdentifier,
+        cacheCompression,
       });
     } else {
       result = await transform(source, options);
diff --git a/test/cache.test.js b/test/cache.test.js
index 331341da..079f0df0 100644
--- a/test/cache.test.js
+++ b/test/cache.test.js
@@ -119,6 +119,43 @@ test.cb.serial(
   },
 );
 
+test.cb.serial(
+  "should output non-compressed files to standard cache dir when cacheCompression is set to false",
+  t => {
+    const config = Object.assign({}, globalConfig, {
+      output: {
+        path: t.context.directory,
+      },
+      module: {
+        rules: [
+          {
+            test: /\.jsx?/,
+            loader: babelLoader,
+            exclude: /node_modules/,
+            options: {
+              cacheDirectory: true,
+              cacheCompression: false,
+              presets: ["@babel/preset-env"],
+            },
+          },
+        ],
+      },
+    });
+
+    webpack(config, err => {
+      t.is(err, null);
+
+      fs.readdir(defaultCacheDir, (err, files) => {
+        files = files.filter(file => /\b[0-9a-f]{5,40}\b/.test(file));
+
+        t.is(err, null);
+        t.true(files.length > 0);
+        t.end();
+      });
+    });
+  },
+);
+
 test.cb.serial(
   "should output files to standard cache dir if set to true in query",
   t => {