diff --git a/nixos/modules/hardware/all-firmware.nix b/nixos/modules/hardware/all-firmware.nix
index da2bc8ffef4..89a1217dfb3 100644
--- a/nixos/modules/hardware/all-firmware.nix
+++ b/nixos/modules/hardware/all-firmware.nix
@@ -83,7 +83,6 @@ in {
         broadcom-bt-firmware
         b43Firmware_5_1_138
         b43Firmware_6_30_163_46
-        b43FirmwareCutter
         xow_dongle-firmware
       ] ++ optionals pkgs.stdenv.hostPlatform.isx86 [
         facetimehd-calibration
diff --git a/nixos/modules/services/hardware/udev.nix b/nixos/modules/services/hardware/udev.nix
index 2f386617187..2e9deebbb74 100644
--- a/nixos/modules/services/hardware/udev.nix
+++ b/nixos/modules/services/hardware/udev.nix
@@ -171,6 +171,11 @@ let
       mv etc/udev/hwdb.bin $out
     '';
 
+  compressFirmware = if config.boot.kernelPackages.kernelAtLeast "5.3" then
+    pkgs.compressFirmwareXz
+  else
+    id;
+
   # Udev has a 512-character limit for ENV{PATH}, so create a symlink
   # tree to work around this.
   udevPath = pkgs.buildEnv {
@@ -267,7 +272,7 @@ in
       '';
       apply = list: pkgs.buildEnv {
         name = "firmware";
-        paths = list;
+        paths = map compressFirmware list;
         pathsToLink = [ "/lib/firmware" ];
         ignoreCollisions = true;
       };
diff --git a/nixos/modules/system/boot/kernel.nix b/nixos/modules/system/boot/kernel.nix
index fad00e39497..b2c92a85f7a 100644
--- a/nixos/modules/system/boot/kernel.nix
+++ b/nixos/modules/system/boot/kernel.nix
@@ -273,9 +273,6 @@ in
 
         boot.kernelModules = [ "loop" "atkbd" ];
 
-        # The Linux kernel >= 2.6.27 provides firmware.
-        hardware.firmware = [ kernel ];
-
         # Create /etc/modules-load.d/nixos.conf, which is read by
         # systemd-modules-load.service to load required kernel modules.
         environment.etc =
diff --git a/pkgs/build-support/kernel/compress-firmware-xz.nix b/pkgs/build-support/kernel/compress-firmware-xz.nix
new file mode 100644
index 00000000000..56595131c89
--- /dev/null
+++ b/pkgs/build-support/kernel/compress-firmware-xz.nix
@@ -0,0 +1,16 @@
+{ runCommand }:
+
+firmware:
+
+runCommand "${firmware.name}-xz" {} ''
+  mkdir -p $out/lib
+  (cd ${firmware} && find lib/firmware -type d -print0) |
+      (cd $out && xargs -0 mkdir -v --)
+  (cd ${firmware} && find lib/firmware -type f -print0) |
+      (cd $out && xargs -0tP "$NIX_BUILD_CORES" -n1 \
+          sh -c 'xz -9c -T1 -C crc32 --lzma2=dict=2MiB "${firmware}/$1" > "$1.xz"' --)
+  (cd ${firmware} && find lib/firmware -type l) | while read link; do
+      target="$(readlink "${firmware}/$link")"
+      ln -vs -- "''${target/^${firmware}/$out}.xz" "$out/$link.xz"
+  done
+''
diff --git a/pkgs/build-support/kernel/modules-closure.sh b/pkgs/build-support/kernel/modules-closure.sh
index 3b3a38ea1d3..74bc490eb15 100644
--- a/pkgs/build-support/kernel/modules-closure.sh
+++ b/pkgs/build-support/kernel/modules-closure.sh
@@ -81,8 +81,12 @@ for module in $(cat closure); do
     for i in $(modinfo -b $kernel --set-version "$version" -F firmware $module | grep -v '^name:'); do
         mkdir -p "$out/lib/firmware/$(dirname "$i")"
         echo "firmware for $module: $i"
-        cp "$firmware/lib/firmware/$i" "$out/lib/firmware/$i" 2>/dev/null \
-            || echo "WARNING: missing firmware $i for module $module"
+        for name in "$i" "$i.xz" ""; do
+            [ -z "$name" ] && echo "WARNING: missing firmware $i for module $module"
+            if cp "$firmware/lib/firmware/$name" "$out/lib/firmware/$name" 2>/dev/null; then
+                break
+            fi
+        done
     done
 done
 
diff --git a/pkgs/os-specific/linux/firmware/b43-firmware/6.30.163.46.nix b/pkgs/os-specific/linux/firmware/b43-firmware/6.30.163.46.nix
index 622b89b1bae..92c179726d2 100644
--- a/pkgs/os-specific/linux/firmware/b43-firmware/6.30.163.46.nix
+++ b/pkgs/os-specific/linux/firmware/b43-firmware/6.30.163.46.nix
@@ -14,8 +14,8 @@ stdenv.mkDerivation rec {
   sourceRoot = ".";
 
   installPhase = ''
-    mkdir $out
-    b43-fwcutter -w $out *.wl_apsta.o
+    mkdir -p $out/lib/firmware
+    b43-fwcutter -w $out/lib/firmware *.wl_apsta.o
   '';
 
   meta = with lib; {
diff --git a/pkgs/os-specific/linux/kernel/common-config.nix b/pkgs/os-specific/linux/kernel/common-config.nix
index fdf54d302bf..d25e20bac8b 100644
--- a/pkgs/os-specific/linux/kernel/common-config.nix
+++ b/pkgs/os-specific/linux/kernel/common-config.nix
@@ -883,6 +883,8 @@ let
       # Disable the firmware helper fallback, udev doesn't implement it any more
       FW_LOADER_USER_HELPER_FALLBACK = option no;
 
+      FW_LOADER_COMPRESS = option yes;
+
       HOTPLUG_PCI_ACPI = yes; # PCI hotplug using ACPI
       HOTPLUG_PCI_PCIE = yes; # PCI-Expresscard hotplug support
 
diff --git a/pkgs/top-level/all-packages.nix b/pkgs/top-level/all-packages.nix
index 142c98c5d93..c3226537e8b 100644
--- a/pkgs/top-level/all-packages.nix
+++ b/pkgs/top-level/all-packages.nix
@@ -808,6 +808,8 @@ with pkgs;
       sanitizers = [ ];
     };
 
+  compressFirmwareXz = callPackage ../build-support/kernel/compress-firmware-xz.nix { };
+
   makeModulesClosure = { kernel, firmware, rootModules, allowMissing ? false }:
     callPackage ../build-support/kernel/modules-closure.nix {
       inherit kernel firmware rootModules allowMissing;