diff --git a/fileutil/tarball_compressor.go b/fileutil/tarball_compressor.go
index 4a789f04..3d2f4201 100644
--- a/fileutil/tarball_compressor.go
+++ b/fileutil/tarball_compressor.go
@@ -162,6 +162,11 @@ func (c tarballCompressor) DecompressFileToDir(tarballPath string, dir string, o
 			}
 
 		case tar.TypeReg:
+			directoryPath := filepath.Dir(fullName)
+			if err := c.fs.MkdirAll(directoryPath, fs.FileMode(0755)); err != nil {
+				return bosherr.WrapError(err, "Creating directory for decompressed file")
+			}
+
 			outFile, err := c.fs.OpenFile(fullName, os.O_CREATE|os.O_WRONLY, fs.FileMode(header.Mode))
 			if err != nil {
 				return bosherr.WrapError(err, "Creating decompressed file")
diff --git a/fileutil/tarball_compressor_test.go b/fileutil/tarball_compressor_test.go
index c7f59a5f..e5f1869f 100644
--- a/fileutil/tarball_compressor_test.go
+++ b/fileutil/tarball_compressor_test.go
@@ -245,6 +245,27 @@ var _ = Describe("tarballCompressor", func() {
 			Expect(err.Error()).To(ContainSubstring(dstDir))
 		})
 
+		It("creates sub-directories even if the tarball does not have a header entry for the directory", func() {
+			compressor := NewTarballCompressor(fs)
+
+			// The contents of this tarball does not contain entries for the dir/ or dir/nested-dir/ directories. The tar executable
+			// automatically creates these directories when extracting files listed under the directories.
+			tarballPath := filepath.Join(fixtureSrcDir(), filepath.FromSlash("../compressor-decompress-missing-directory-header.tgz"))
+			err := compressor.DecompressFileToDir(tarballPath, dstDir, CompressorOptions{})
+			Expect(err).ToNot(HaveOccurred())
+
+			dstElements, err := pathsInDir(dstDir)
+			Expect(err).ToNot(HaveOccurred())
+			Expect(dstElements).To(Equal([]string{
+				"./",
+				"dir/",
+				"dir/file1",
+				"dir/file2",
+				"dir/nested-dir/",
+				"dir/nested-dir/file3",
+			}))
+		})
+
 		Context("with tarball contents owned by root", func() {
 
 			var (
diff --git a/fileutil/test_assets/compressor-decompress-missing-directory-header.tgz b/fileutil/test_assets/compressor-decompress-missing-directory-header.tgz
new file mode 100644
index 00000000..50130f99
Binary files /dev/null and b/fileutil/test_assets/compressor-decompress-missing-directory-header.tgz differ