diff --git a/tests/test_handler.py b/tests/test_handler.py
index 66e25fe30..a3ac8be10 100644
--- a/tests/test_handler.py
+++ b/tests/test_handler.py
@@ -285,6 +285,30 @@ def test_wsgi_script_binary_support_base64_behavior(self):
         self.assertTrue(response["isBase64Encoded"])
         self.assertTrue(is_base64(response["body"]))
 
+        content_encoded_json = {
+            **text_plain_event,
+            **{"path": "/content_encoding_header_json1"},
+        }
+
+        response = lh.handler(content_encoded_json, None)
+
+        self.assertEqual(response["statusCode"], 200)
+        self.assertIn("isBase64Encoded", response)
+        self.assertTrue(response["isBase64Encoded"])
+        self.assertTrue(is_base64(response["body"]))
+
+        content_encoded_text_arbitrary = {
+            **text_plain_event,
+            **{"path": "/content_encoding_header_textarbitrary1"},
+        }
+
+        response = lh.handler(content_encoded_text_arbitrary, None)
+
+        self.assertEqual(response["statusCode"], 200)
+        self.assertIn("isBase64Encoded", response)
+        self.assertTrue(response["isBase64Encoded"])
+        self.assertTrue(is_base64(response["body"]))
+
     def test_wsgi_script_on_cognito_event_request(self):
         """
         Ensure that requests sent by cognito behave sensibly
diff --git a/tests/test_wsgi_binary_support_app.py b/tests/test_wsgi_binary_support_app.py
index 5666426de..ccb78397a 100644
--- a/tests/test_wsgi_binary_support_app.py
+++ b/tests/test_wsgi_binary_support_app.py
@@ -28,3 +28,21 @@ def json_mimetype_response_1():
 @app.route("/arbitrarybinary_mimetype_response1", methods=["GET"])
 def arbitrary_mimetype_response_1():
     return Response(response=b"some binary data", mimetype="arbitrary/binary_mimetype")
+
+
+@app.route("/content_encoding_header_json1", methods=["GET"])
+def response_with_content_encoding_mimetype1():
+    return Response(
+        response=json.dumps({"some": "data"}),
+        mimetype="application/json",
+        headers={"Content-Encoding": "gzip"},
+    )
+
+
+@app.route("/content_encoding_header_textarbitrary1", methods=["GET"])
+def response_with_content_encoding_mimetype2():
+    return Response(
+        response="OK",
+        mimetype="text/arbitrary",
+        headers={"Content-Encoding": "shouldnt_matter"},
+    )
diff --git a/zappa/handler.py b/zappa/handler.py
index 41336dc15..8d95718f1 100644
--- a/zappa/handler.py
+++ b/zappa/handler.py
@@ -583,7 +583,17 @@ def handler(self, event, context):
                         )
 
                     if response.data:
-                        if (
+                        if settings.BINARY_SUPPORT and response.headers.get(
+                            "Content-Encoding"
+                        ):
+                            # We could have a text response that's gzip
+                            # encoded. Therefore, we base-64 encode it.
+                            # Related: https://github.com/zappa/Zappa/issues/908
+                            zappa_returndict["body"] = base64.b64encode(
+                                response.data
+                            ).decode("utf-8")
+                            zappa_returndict["isBase64Encoded"] = True
+                        elif (
                             settings.BINARY_SUPPORT
                             and not response.mimetype.startswith("text/")
                             and response.mimetype != "application/json"