diff --git a/doc/source/whatsnew/v1.3.0.rst b/doc/source/whatsnew/v1.3.0.rst
index e61f50afea838..ac1f74a5fceb6 100644
--- a/doc/source/whatsnew/v1.3.0.rst
+++ b/doc/source/whatsnew/v1.3.0.rst
@@ -55,6 +55,7 @@ Other enhancements
 - :meth:`DataFrame.plot.scatter` can now accept a categorical column as the argument to ``c`` (:issue:`12380`, :issue:`31357`)
 - :meth:`.Styler.set_tooltips` allows on hover tooltips to be added to styled HTML dataframes.
 - :meth:`Series.loc.__getitem__` and :meth:`Series.loc.__setitem__` with :class:`MultiIndex` now raising helpful error message when indexer has too many dimensions (:issue:`35349`)
+- :meth:`pandas.read_stata` and :class:`StataReader` support reading data from compressed files.
 
 .. ---------------------------------------------------------------------------
 
diff --git a/pandas/io/stata.py b/pandas/io/stata.py
index 9a5c9e4a2e2b2..8f8c435fae4f3 100644
--- a/pandas/io/stata.py
+++ b/pandas/io/stata.py
@@ -98,6 +98,19 @@
     Return StataReader object for iterations, returns chunks with
     given number of lines."""
 
+_compression_params = f"""\
+compression : str or dict, default None
+    If string, specifies compression mode. If dict, value at key 'method'
+    specifies compression mode. Compression mode must be one of {{'infer',
+    'gzip', 'bz2', 'zip', 'xz', None}}. If compression mode is 'infer'
+    and `filepath_or_buffer` is path-like, then detect compression from
+    the following extensions: '.gz', '.bz2', '.zip', or '.xz' (otherwise
+    no compression). If dict and compression mode is one of
+    {{'zip', 'gzip', 'bz2'}}, or inferred as one of the above,
+    other entries passed as additional compression options.
+{generic._shared_docs["storage_options"]}"""
+
+
 _iterator_params = """\
 iterator : bool, default False
     Return StataReader object."""
@@ -129,6 +142,7 @@
 {_statafile_processing_params2}
 {_chunksize_params}
 {_iterator_params}
+{_compression_params}
 
 Returns
 -------
@@ -180,6 +194,7 @@
 {_statafile_processing_params1}
 {_statafile_processing_params2}
 {_chunksize_params}
+{_compression_params}
 
 {_reader_notes}
 """
@@ -1026,6 +1041,7 @@ def __init__(
         columns: Optional[Sequence[str]] = None,
         order_categoricals: bool = True,
         chunksize: Optional[int] = None,
+        compression: CompressionOptions = "infer",
         storage_options: StorageOptions = None,
     ):
         super().__init__()
@@ -1064,10 +1080,10 @@ def __init__(
             "rb",
             storage_options=storage_options,
             is_text=False,
+            compression=compression,
         ) as handles:
             # Copy to BytesIO, and ensure no encoding
-            contents = handles.handle.read()
-        self.path_or_buf = BytesIO(contents)  # type: ignore[arg-type]
+            self.path_or_buf = BytesIO(handles.handle.read())  # type: ignore[arg-type]
 
         self._read_header()
         self._setup_dtype()
@@ -1898,6 +1914,7 @@ def read_stata(
     order_categoricals: bool = True,
     chunksize: Optional[int] = None,
     iterator: bool = False,
+    compression: CompressionOptions = "infer",
     storage_options: StorageOptions = None,
 ) -> Union[DataFrame, StataReader]:
 
@@ -1912,6 +1929,7 @@ def read_stata(
         order_categoricals=order_categoricals,
         chunksize=chunksize,
         storage_options=storage_options,
+        compression=compression,
     )
 
     if iterator or chunksize:
diff --git a/pandas/tests/io/test_stata.py b/pandas/tests/io/test_stata.py
index 5897b91a5fa70..058dc7659fc95 100644
--- a/pandas/tests/io/test_stata.py
+++ b/pandas/tests/io/test_stata.py
@@ -2003,3 +2003,48 @@ def test_precision_loss():
         tm.assert_series_equal(reread.dtypes, expected_dt)
         assert reread.loc[0, "little"] == df.loc[0, "little"]
         assert reread.loc[0, "big"] == float(df.loc[0, "big"])
+
+
+def test_compression_roundtrip(compression):
+    df = DataFrame(
+        [[0.123456, 0.234567, 0.567567], [12.32112, 123123.2, 321321.2]],
+        index=["A", "B"],
+        columns=["X", "Y", "Z"],
+    )
+    df.index.name = "index"
+
+    with tm.ensure_clean() as path:
+
+        df.to_stata(path, compression=compression)
+        reread = read_stata(path, compression=compression, index_col="index")
+        tm.assert_frame_equal(df, reread)
+
+        # explicitly ensure file was compressed.
+        with tm.decompress_file(path, compression) as fh:
+            contents = io.BytesIO(fh.read())
+        reread = pd.read_stata(contents, index_col="index")
+        tm.assert_frame_equal(df, reread)
+
+
+@pytest.mark.parametrize("to_infer", [True, False])
+@pytest.mark.parametrize("read_infer", [True, False])
+def test_stata_compression(compression_only, read_infer, to_infer):
+    compression = compression_only
+
+    ext = "gz" if compression == "gzip" else compression
+    filename = f"test.{ext}"
+
+    df = DataFrame(
+        [[0.123456, 0.234567, 0.567567], [12.32112, 123123.2, 321321.2]],
+        index=["A", "B"],
+        columns=["X", "Y", "Z"],
+    )
+    df.index.name = "index"
+
+    to_compression = "infer" if to_infer else compression
+    read_compression = "infer" if read_infer else compression
+
+    with tm.ensure_clean(filename) as path:
+        df.to_stata(path, compression=to_compression)
+        result = pd.read_stata(path, compression=read_compression, index_col="index")
+        tm.assert_frame_equal(result, df)