diff --git a/tornado/simple_httpclient.py b/tornado/simple_httpclient.py
index 45d4c747..2c657a8a 100644
--- a/tornado/simple_httpclient.py
+++ b/tornado/simple_httpclient.py
@@ -15,6 +15,7 @@ import logging
 import re
 import socket
 import urlparse
+import zlib
 
 try:
     import ssl # python 2.6+
@@ -68,6 +69,7 @@ class _HTTPConnection(object):
         self.code = None
         self.headers = None
         self.chunks = None
+        self._decompressor = None
         with stack_context.StackContext(self.cleanup):
             parsed = urlparse.urlsplit(self.request.url)
             if ":" in parsed.netloc:
@@ -113,6 +115,8 @@ class _HTTPConnection(object):
         if (self.request.method == "POST" and
             "Content-Type" not in self.request.headers):
             self.request.headers["Content-Type"] = "application/x-www-form-urlencoded"
+        if self.request.use_gzip:
+            self.request.headers["Accept-Encoding"] = "gzip"
         req_path = ((parsed.path or '/') +
                 (('?' + parsed.query) if parsed.query else ''))
         request_lines = ["%s %s HTTP/1.1" % (self.request.method,
@@ -147,6 +151,11 @@ class _HTTPConnection(object):
         if self.request.header_callback is not None:
             for k, v in self.headers.get_all():
                 self.request.header_callback("%s: %s\r\n" % (k, v))
+        if (self.request.use_gzip and
+            self.headers.get("Content-Encoding") == "gzip"):
+            # Magic parameter makes zlib module understand gzip header
+            # http://stackoverflow.com/questions/1838699/how-can-i-decompress-a-gzip-stream-with-zlib
+            self._decompressor = zlib.decompressobj(16+zlib.MAX_WBITS)
         if self.headers.get("Transfer-Encoding") == "chunked":
             self.chunks = []
             self.stream.read_until("\r\n", self._on_chunk_length)
@@ -158,6 +167,8 @@ class _HTTPConnection(object):
                             "don't know how to read %s", self.request.url)
 
     def _on_body(self, data):
+        if self._decompressor:
+            data = self._decompressor.decompress(data)
         if self.request.streaming_callback:
             if self.chunks is None:
                 # if chunks is not None, we already called streaming_callback
@@ -175,6 +186,9 @@ class _HTTPConnection(object):
         # TODO: "chunk extensions" http://tools.ietf.org/html/rfc2616#section-3.6.1
         length = int(data.strip(), 16)
         if length == 0:
+            # all the data has been decompressed, so we don't need to
+            # decompress again in _on_body
+            self._decompressor = None
             self._on_body(''.join(self.chunks))
         else:
             self.stream.read_bytes(length + 2,  # chunk ends with \r\n
@@ -183,6 +197,8 @@ class _HTTPConnection(object):
     def _on_chunk_data(self, data):
         assert data[-2:] == "\r\n"
         chunk = data[:-2]
+        if self._decompressor:
+            chunk = self._decompressor.decompress(chunk)
         if self.request.streaming_callback is not None:
             self.request.streaming_callback(chunk)
         else:
diff --git a/tornado/test/simple_httpclient_test.py b/tornado/test/simple_httpclient_test.py
index 1bece2a3..d72f01cc 100644
--- a/tornado/test/simple_httpclient_test.py
+++ b/tornado/test/simple_httpclient_test.py
@@ -1,5 +1,8 @@
 #!/usr/bin/env python
 
+import gzip
+import logging
+
 from tornado.simple_httpclient import SimpleAsyncHTTPClient
 from tornado.testing import AsyncHTTPTestCase, LogTrapTestCase
 from tornado.web import Application, RequestHandler
@@ -32,7 +35,7 @@ class SimpleHTTPClientTestCase(AsyncHTTPTestCase, LogTrapTestCase):
             ("/post", PostHandler),
             ("/chunk", ChunkHandler),
             ("/auth", AuthHandler),
-            ])
+            ], gzip=True)
 
     def setUp(self):
         super(SimpleHTTPClientTestCase, self).setUp()
@@ -77,3 +80,17 @@ class SimpleHTTPClientTestCase(AsyncHTTPTestCase, LogTrapTestCase):
         self.assertEqual(self.fetch("/auth", auth_username="Aladdin",
                                     auth_password="open sesame").body,
                          "Basic QWxhZGRpbjpvcGVuIHNlc2FtZQ==")
+
+    def test_gzip(self):
+        # All the tests in this file should be using gzip, but this test
+        # ensures that it is in fact getting compressed.
+        # Setting Accept-Encoding manually bypasses the client's
+        # decompression so we can see the raw data.
+        response = self.fetch("/chunk", use_gzip=False,
+                              headers={"Accept-Encoding": "gzip"})
+        self.assertEqual(response.headers["Content-Encoding"], "gzip")
+        self.assertNotEqual(response.body, "asdfqwer")
+        # Our test data gets bigger when gzipped.  Oops.  :)
+        self.assertEqual(len(response.body), 34)
+        f = gzip.GzipFile(mode="r", fileobj=response.buffer)
+        self.assertEqual(f.read(), "asdfqwer")