diff --git a/lib/Cargo.toml b/lib/Cargo.toml
index a9a2d829..ef6f5e42 100644
--- a/lib/Cargo.toml
+++ b/lib/Cargo.toml
@@ -12,7 +12,7 @@ rust-version = "1.74.0"
 [dependencies]
 anyhow = "1.0"
 containers-image-proxy = "0.5.5"
-async-compression = { version = "0.4", features = ["gzip", "tokio"] }
+async-compression = { version = "0.4", features = ["gzip", "tokio", "zstd"] }
 camino = "1.0.4"
 chrono = "0.4.19"
 olpc-cjson = "0.1.1"
diff --git a/lib/src/container/unencapsulate.rs b/lib/src/container/unencapsulate.rs
index 11f56c0f..b6efb8d8 100644
--- a/lib/src/container/unencapsulate.rs
+++ b/lib/src/container/unencapsulate.rs
@@ -198,6 +198,9 @@ fn new_async_decompressor<'a>(
         oci_image::MediaType::ImageLayerGzip => Ok(Box::new(tokio::io::BufReader::new(
             async_compression::tokio::bufread::GzipDecoder::new(src),
         ))),
+        oci_image::MediaType::ImageLayerZstd => Ok(Box::new(tokio::io::BufReader::new(
+            async_compression::tokio::bufread::ZstdDecoder::new(src),
+        ))),
         oci_image::MediaType::ImageLayer => Ok(Box::new(src)),
         oci_image::MediaType::Other(t) if t.as_str() == DOCKER_TYPE_LAYER_TAR => Ok(Box::new(src)),
         o => Err(anyhow::anyhow!("Unhandled layer type: {}", o)),
diff --git a/lib/tests/it/main.rs b/lib/tests/it/main.rs
index cfd1f271..464cab36 100644
--- a/lib/tests/it/main.rs
+++ b/lib/tests/it/main.rs
@@ -1261,6 +1261,47 @@ async fn test_container_write_derive() -> Result<()> {
     Ok(())
 }
 
+/// Test for zstd
+/// We need to handle the case of modified hardlinks into /sysroot
+#[tokio::test]
+async fn test_container_zstd() -> Result<()> {
+    let fixture = Fixture::new_v1()?;
+    let baseimg = &fixture.export_container().await?.0;
+    let basepath = &match baseimg.transport {
+        Transport::OciDir => fixture.path.join(baseimg.name.as_str()),
+        _ => unreachable!(),
+    };
+    let baseimg_ref = format!("oci:{basepath}");
+    let zstd_image_path = &fixture.path.join("zstd.oci");
+    let st = tokio::process::Command::new("skopeo")
+        .args([
+            "copy",
+            "--dest-compress-format=zstd",
+            baseimg_ref.as_str(),
+            &format!("oci:{zstd_image_path}"),
+        ])
+        .status()
+        .await?;
+    assert!(st.success());
+
+    let zstdref = &OstreeImageReference {
+        sigverify: SignatureSource::ContainerPolicyAllowInsecure,
+        imgref: ImageReference {
+            transport: Transport::OciDir,
+            name: zstd_image_path.to_string(),
+        },
+    };
+    let mut imp =
+        store::ImageImporter::new(fixture.destrepo(), zstdref, Default::default()).await?;
+    let prep = match imp.prepare().await.context("Init prep derived")? {
+        store::PrepareResult::AlreadyPresent(_) => panic!("should not be already imported"),
+        store::PrepareResult::Ready(r) => r,
+    };
+    let _ = imp.import(prep).await.unwrap();
+
+    Ok(())
+}
+
 /// Test for https://github.com/ostreedev/ostree-rs-ext/issues/405
 /// We need to handle the case of modified hardlinks into /sysroot
 #[tokio::test]