diff --git a/Config.in b/Config.in
index f3db905f24..a634328074 100644
--- a/Config.in
+++ b/Config.in
@@ -43,6 +43,10 @@ menu "Target Images"
 
 			config TARGET_INITRAMFS_COMPRESSION_LZO
 				bool "lzo"
+
+			config TARGET_INITRAMFS_COMPRESSION_XZ
+				bool "xz"
+				depends LINUX_2_6_38
 		endchoice
 
 	comment "Root filesystem archives"
diff --git a/include/kernel-defaults.mk b/include/kernel-defaults.mk
index 312664ab7a..210e279131 100644
--- a/include/kernel-defaults.mk
+++ b/include/kernel-defaults.mk
@@ -67,6 +67,7 @@ ifeq ($(CONFIG_TARGET_ROOTFS_INITRAMFS),y)
 		echo -e "$(if $(CONFIG_TARGET_INITRAMFS_COMPRESSION_BZIP2),CONFIG_INITRAMFS_COMPRESSION_BZIP2=y\nCONFIG_RD_BZIP2=y,# CONFIG_INITRAMFS_COMPRESSION_BZIP2 is not set\n# CONFIG_RD_BZIP2 is not set)" >> $(LINUX_DIR)/.config
 		echo -e "$(if $(CONFIG_TARGET_INITRAMFS_COMPRESSION_LZMA),CONFIG_INITRAMFS_COMPRESSION_LZMA=y\nCONFIG_RD_LZMA=y,# CONFIG_INITRAMFS_COMPRESSION_LZMA is not set\n# CONFIG_RD_LZMA is not set)" >> $(LINUX_DIR)/.config
 		echo -e "$(if $(CONFIG_TARGET_INITRAMFS_COMPRESSION_LZO),CONFIG_INITRAMFS_COMPRESSION_LZO=y\nCONFIG_RD_LZO=y,# CONFIG_INITRAMFS_COMPRESSION_LZO is not set\n# CONFIG_RD_LZO is not set)" >> $(LINUX_DIR)/.config
+		echo -e "$(if $(CONFIG_TARGET_INITRAMFS_COMPRESSION_XZ),CONFIG_INITRAMFS_COMPRESSION_XZ=y\nCONFIG_RD_XZ=y,# CONFIG_INITRAMFS_COMPRESSION_XZ is not set\n# CONFIG_RD_XZ is not set)" >> $(LINUX_DIR)/.config
     endef
   else
     define Kernel/SetInitramfs