diff --git a/CHANGELOG.md b/CHANGELOG.md
index 0503226c95..30f47591a1 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -24,6 +24,8 @@ and this project adheres to
 - Shared doc lookup in clustered environments now works across nodes instead of
   only searching locally
   [#3910](https://github.com/OpenFn/lightning/issues/3910)
+- Accept gzip-compressed payloads on
+  webhooks[#3937](https://github.com/OpenFn/lightning/issues/3937)
 
 ## [2.14.14] - 2025-11-05
 
diff --git a/lib/lightning_web/plug_configs.ex b/lib/lightning_web/plug_configs.ex
index 0a175a806b..aba376975d 100644
--- a/lib/lightning_web/plug_configs.ex
+++ b/lib/lightning_web/plug_configs.ex
@@ -15,6 +15,7 @@ defmodule LightningWeb.PlugConfigs do
         }
       ],
       pass: ["*/*"],
+      body_reader: {LightningWeb.Plugs.DecompressBody, :read_body, []},
       json_decoder: Phoenix.json_library()
     ]
   end
diff --git a/lib/lightning_web/plugs/decompress_body.ex b/lib/lightning_web/plugs/decompress_body.ex
new file mode 100644
index 0000000000..0be3ab4659
--- /dev/null
+++ b/lib/lightning_web/plugs/decompress_body.ex
@@ -0,0 +1,21 @@
+defmodule LightningWeb.Plugs.DecompressBody do
+  @moduledoc """
+  A Plug body reader that decompresses gzipped request bodies. Checks for the `Content-Encoding: gzip` header and automatically
+  decompresses the request body before it's passed to the JSON parser.
+  """
+  def read_body(conn, opts) do
+    case Plug.Conn.get_req_header(conn, "content-encoding") do
+      ["gzip" | _] ->
+        case Plug.Conn.read_body(conn, opts) do
+          {:ok, body, conn} ->
+            {:ok, :zlib.gunzip(body), conn}
+
+          other ->
+            other
+        end
+
+      _ ->
+        Plug.Conn.read_body(conn, opts)
+    end
+  end
+end
diff --git a/test/lightning_web/plugs/decompress_body_test.exs b/test/lightning_web/plugs/decompress_body_test.exs
new file mode 100644
index 0000000000..bf8f0d6e1f
--- /dev/null
+++ b/test/lightning_web/plugs/decompress_body_test.exs
@@ -0,0 +1,74 @@
+defmodule LightningWeb.Plugs.DecompressBodyTest do
+  use LightningWeb.ConnCase, async: true
+
+  alias LightningWeb.Plugs.DecompressBody
+
+  describe "read_body/2" do
+    test "decompresses gzipped request body", %{conn: conn} do
+      json_data = %{"traitors" => ["alan"], "faithfuls" => ["david"]}
+      json_string = Jason.encode!(json_data)
+
+      # Compress the JSON string
+      gzipped_body = :zlib.gzip(json_string)
+
+      # Simulate a connection with gzipped body
+      conn =
+        conn
+        |> put_req_header("content-encoding", "gzip")
+        |> Map.put(:body_params, %{})
+
+      # Mock the body reading by setting adapter data
+      conn = %{
+        conn
+        | adapter: {Plug.Adapters.Test.Conn, %{chunks: [gzipped_body]}}
+      }
+
+      # Call the decompress function
+      {:ok, decompressed_body, _conn} = DecompressBody.read_body(conn, [])
+
+      assert decompressed_body == json_string
+    end
+
+    test "passes through non-gzipped request body", %{conn: conn} do
+      json_data = %{"traitors" => ["alan"], "faithfuls" => ["david"]}
+      json_string = Jason.encode!(json_data)
+
+      # Simulate a connection without compression
+      conn =
+        conn
+        |> Map.put(:body_params, %{})
+
+      # Mock the body reading
+      conn = %{
+        conn
+        | adapter: {Plug.Adapters.Test.Conn, %{chunks: [json_string]}}
+      }
+
+      # Call the read_body function (should just read normally)
+      {:ok, body, _conn} = DecompressBody.read_body(conn, [])
+
+      assert body == json_string
+    end
+
+    test "handles multiple content-encoding headers", %{conn: conn} do
+      json_string = Jason.encode!(%{"test" => "data"})
+      gzipped_body = :zlib.gzip(json_string)
+
+      # Multiple headers with gzip first
+      conn =
+        conn
+        |> put_req_header("content-encoding", "gzip")
+        |> put_req_header("content-encoding", "identity")
+        |> Map.put(:body_params, %{})
+
+      conn = %{
+        conn
+        | adapter: {Plug.Adapters.Test.Conn, %{chunks: [gzipped_body]}}
+      }
+
+      {:ok, decompressed_body, _conn} = DecompressBody.read_body(conn, [])
+
+      assert decompressed_body == json_string
+    end
+  end
+end