diff --git a/doc/manual/rl-next/enable-zstd-for-binary-cache.md b/doc/manual/rl-next/enable-zstd-for-binary-cache.md
new file mode 100644
index 000000000..125ee4951
--- /dev/null
+++ b/doc/manual/rl-next/enable-zstd-for-binary-cache.md
@@ -0,0 +1,36 @@
+---
+synopsis: Enable high compress ratio zstd compression by default for binary caches uploads
+issues: [fj#945]
+cls: [4503]
+category: "Breaking Changes"
+credits: [horrors, raito]
+---
+
+The default compression method for binary cache uploads has been switched from
+[`xz`](https://github.com/tukaani-project/xz) to
+[`zstd`](https://github.com/facebook/zstd) to address performance and usability
+issues related to modern hardware and high-speed connections.
+
+## Why?
+
+`xz` offers compression ratios but is single-threaded in our implementation and
+very slow (~10-20 Mbps in our test), preventing full utilization of 100Mbps+
+connections and significantly slowing decompression for end users.
+
+Lix is a "compress once, decompress many" application: build farms can afford
+to spend more time compressing to achieve a faster download transfer for the
+end user. More importantly, it matters that all end users spend the least
+amount of time decompressing.
+
+## What about compression ratios?
+
+`zstd` cannot achieve the same peaks as `xz`, nonetheless, `zstd` compression
+level has been increased to level 12 by default to balance compression ratio
+and performance.
+
+## Synthetic test case data
+
+* **xz** (default compression level) on a 4.4GB file: ~632MB (77s)
+* **zstd** (level 12) on the same file: ~775MB (18s), 18% larger but 50% faster
+* **zstd** (level 14): ~773MB (37s)
+* **zstd** (level 16): ~735MB (66s)
diff --git a/lix/libstore/binary-cache-store.hh b/lix/libstore/binary-cache-store.hh
index e8a7e4c5d..40cb3056c 100644
--- a/lix/libstore/binary-cache-store.hh
+++ b/lix/libstore/binary-cache-store.hh
@@ -19,8 +19,12 @@ struct BinaryCacheStoreConfig : virtual StoreConfig
 {
     using StoreConfig::StoreConfig;
 
-    const Setting<std::string> compression{this, "xz", "compression",
-        "NAR compression method (`xz`, `bzip2`, `gzip`, `zstd`, or `none`)."};
+    const Setting<std::string> compression{
+        this,
+        "zstd",
+        "compression",
+        "NAR compression method (`xz`, `bzip2`, `gzip`, `zstd`, or `none`)."
+    };
 
     const Setting<bool> writeNARListing{this, false, "write-nar-listing",
         "Whether to write a JSON file that lists the files in each NAR."};
@@ -40,12 +44,19 @@ struct BinaryCacheStoreConfig : virtual StoreConfig
     const Setting<bool> parallelCompression{this, false, "parallel-compression",
         "Enable multi-threaded compression of NARs. This is currently only available for `xz` and `zstd`."};
 
-    const Setting<int> compressionLevel{this, -1, "compression-level",
+    const Setting<int> compressionLevel{
+        this,
+        -1,
+        "compression-level",
         R"(
           The *preset level* to be used when compressing NARs.
           The meaning and accepted values depend on the compression method selected.
           `-1` specifies that the default compression level should be used.
-        )"};
+
+          Note: when using zstd `-1` will select level 12 to approximately match xz compression
+          ratios at default settings rather than the zstd library default of 3.
+        )"
+    };
 };
 
 
diff --git a/lix/libutil/compression.cc b/lix/libutil/compression.cc
index eea659c10..d4ed63a0f 100644
--- a/lix/libutil/compression.cc
+++ b/lix/libutil/compression.cc
@@ -465,6 +465,17 @@ ref<CompressionSink> makeCompressionSink(const std::string & method, Sink & next
     std::vector<std::string> la_supports = {
         "bzip2", "compress", "grzip", "gzip", "lrzip", "lz4", "lzip", "lzma", "lzop", "xz", "zstd"
     };
+
+    // NOTE: Lix overrides the default here because we want the default zstd behavior
+    // to perform well on compression ratios in the hopes to approach what xz provided in the past.
+    // We choose one that is much faster than xz while being in range of xz compression ratios.
+    //
+    // In our experience, further levels provides marginal benefits but makes the compression speed
+    // much slower in exchange.
+    if (level == COMPRESSION_LEVEL_DEFAULT && method == "zstd") {
+        level = 12;
+    }
+
     if (std::find(la_supports.begin(), la_supports.end(), method) != la_supports.end()) {
         return make_ref<ArchiveCompressionSink>(nextSink, method, parallel, level);
     }
diff --git a/package.nix b/package.nix
index cdc7f1228..fb86ce844 100644
--- a/package.nix
+++ b/package.nix
@@ -61,6 +61,7 @@
   util-linuxMinimal ? utillinuxMinimal,
   utillinuxMinimal ? null,
   xz,
+  zstd,
   yq,
 
   busybox-sandbox-shell,
@@ -331,6 +332,7 @@ stdenv.mkDerivation (finalAttrs: {
     jq
     yq
     lsof
+    zstd
   ]
   ++ lib.optional hostPlatform.isLinux util-linuxMinimal
   ++ lib.optional (!officialRelease && buildUnreleasedNotes) build-release-notes
diff --git a/tests/functional/binary-cache.sh b/tests/functional/binary-cache.sh
index 50e23e56c..afd61e692 100644
--- a/tests/functional/binary-cache.sh
+++ b/tests/functional/binary-cache.sh
@@ -73,10 +73,10 @@ basicDownloadTests
 # Test whether Lix notices if the NAR doesn't match the hash in the NAR info.
 clearStore
 
-nar=$(ls $cacheDir/nar/*.nar.xz | head -n1)
+nar=$(ls $cacheDir/nar/*.nar.zst | head -n1)
 mv $nar $nar.good
 mkdir -p $TEST_ROOT/empty
-nix-store --dump $TEST_ROOT/empty | xz > $nar
+nix-store --dump $TEST_ROOT/empty | zstd - --stdout > $nar
 
 expect 1 nix-build --substituters "file://$cacheDir" --no-require-sigs dependencies.nix -o $TEST_ROOT/result 2>&1 | tee $TEST_ROOT/log
 grepQuiet "hash mismatch" $TEST_ROOT/log
diff --git a/tests/functional/substitute-truncated-nar.sh b/tests/functional/substitute-truncated-nar.sh
index 1ac7efaf6..cb8188638 100644
--- a/tests/functional/substitute-truncated-nar.sh
+++ b/tests/functional/substitute-truncated-nar.sh
@@ -15,13 +15,13 @@ path=$(build)
 nix copy --to "$BINARY_CACHE" "$path"
 nix-collect-garbage >/dev/null 2>&1
 
-nar=0bylmx35yjy2b1b4k7gjsl7i4vc03cpmryb41grfb1mp40n3hifl.nar.xz
+nar=0c3y7p42issm0ydjilwvk0drv958p4p4d2d6c7y5ksmzmbf7rfhg.nar.zst
 
 [ -e $cacheDir/nar/$nar ] || fail "long nar missing?"
 
-xzcat $cacheDir/nar/$nar > $TEST_HOME/tmp
+zstdcat $cacheDir/nar/$nar > $TEST_HOME/tmp
 truncate -s $(( $(stat -c %s $TEST_HOME/tmp) - 10 )) $TEST_HOME/tmp
-xz < $TEST_HOME/tmp > $cacheDir/nar/$nar
+zstd - --stdout < $TEST_HOME/tmp > $cacheDir/nar/$nar
 
 # Copying back '$path' from the binary cache. This should fail as it is truncated
 if build --option substituters "$BINARY_CACHE" --option require-sigs false -j0; then