diff --git a/packages/playwright-test/src/reporters/blob.ts b/packages/playwright-test/src/reporters/blob.ts
index 115d8008d8..14ff77c071 100644
--- a/packages/playwright-test/src/reporters/blob.ts
+++ b/packages/playwright-test/src/reporters/blob.ts
@@ -16,14 +16,15 @@
 
 import fs from 'fs';
 import path from 'path';
-import { calculateSha1, createGuid } from 'playwright-core/lib/utils';
+import { ManualPromise, calculateSha1, createGuid } from 'playwright-core/lib/utils';
 import { mime } from 'playwright-core/lib/utilsBundle';
 import { Readable } from 'stream';
+import type { EventEmitter } from 'events';
 import type { FullConfig, FullResult, TestResult } from '../../types/testReporter';
 import type { Suite } from '../common/test';
 import type { JsonAttachment, JsonEvent } from '../isomorphic/teleReceiver';
 import { TeleReporterEmitter } from './teleEmitter';
-
+import { yazl } from 'playwright-core/lib/zipBundle';
 
 type BlobReporterOptions = {
   configDir: string;
@@ -41,7 +42,7 @@ export class BlobReporter extends TeleReporterEmitter {
   private _copyFilePromises = new Set<Promise<void>>();
 
   private _outputDir!: string;
-  private _reportFile!: string;
+  private _reportName!: string;
 
   constructor(options: BlobReporterOptions) {
     super(message => this._messages.push(message), false);
@@ -63,7 +64,7 @@ export class BlobReporter extends TeleReporterEmitter {
   override onBegin(config: FullConfig<{}, {}>, suite: Suite): void {
     this._outputDir = path.resolve(this._options.configDir, this._options.outputDir || 'blob-report');
     fs.mkdirSync(path.join(this._outputDir, 'resources'), { recursive: true });
-    this._reportFile = this._computeOutputFileName(config);
+    this._reportName = this._computeReportName(config);
     super.onBegin(config, suite);
   }
 
@@ -71,10 +72,21 @@ export class BlobReporter extends TeleReporterEmitter {
     await super.onEnd(result);
     const lines = this._messages.map(m => JSON.stringify(m) + '\n');
     const content = Readable.from(lines);
+
+    const zipFile = new yazl.ZipFile();
+    const zipFinishPromise = new ManualPromise<undefined>();
+    (zipFile as any as EventEmitter).on('error', error => zipFinishPromise.reject(error));
+    const zipFileName = path.join(this._outputDir, this._reportName + '.zip');
+    zipFile.outputStream.pipe(fs.createWriteStream(zipFileName)).on('close', () => {
+      zipFinishPromise.resolve(undefined);
+    });
+    zipFile.addReadStream(content, this._reportName + '.jsonl');
+    zipFile.end();
+
     await Promise.all([
       ...this._copyFilePromises,
       // Requires Node v14.18.0+
-      fs.promises.writeFile(this._reportFile, content as any).catch(e => console.error(`Failed to write report ${this._reportFile}: ${e}`))
+      zipFinishPromise.catch(e => console.error(`Failed to write report ${zipFileName}: ${e}`))
     ]);
   }
 
@@ -94,13 +106,13 @@ export class BlobReporter extends TeleReporterEmitter {
     });
   }
 
-  private _computeOutputFileName(config: FullConfig) {
+  private _computeReportName(config: FullConfig) {
     let shardSuffix = '';
     if (config.shard) {
       const paddedNumber = `${config.shard.current}`.padStart(`${config.shard.total}`.length, '0');
       shardSuffix = `${paddedNumber}-of-${config.shard.total}-`;
     }
-    return path.join(this._outputDir, `report-${shardSuffix}${createGuid()}.jsonl`);
+    return `report-${shardSuffix}${createGuid()}`;
   }
 
   private _startCopyingFile(from: string, to: string) {
diff --git a/packages/playwright-test/src/reporters/merge.ts b/packages/playwright-test/src/reporters/merge.ts
index 7e49611654..bb9bf7ece3 100644
--- a/packages/playwright-test/src/reporters/merge.ts
+++ b/packages/playwright-test/src/reporters/merge.ts
@@ -23,6 +23,7 @@ import type { JsonConfig, JsonEvent, JsonProject, JsonSuite, JsonTestResultEnd }
 import { TeleReporterReceiver } from '../isomorphic/teleReceiver';
 import { createReporters } from '../runner/reporters';
 import { Multiplexer } from './multiplexer';
+import { ZipFile } from 'playwright-core/lib/utils';
 
 export async function createMergedReport(config: FullConfigInternal, dir: string, reporterDescriptions: ReporterDescription[], resolvePaths: boolean) {
   const shardFiles = await sortedShardFiles(dir);
@@ -52,16 +53,30 @@ function patchAttachmentPaths(events: JsonEvent[], resourceDir: string) {
   }
 }
 
-function parseEvents(reportJsonl: string): JsonEvent[] {
+function parseEvents(reportJsonl: Buffer): JsonEvent[] {
   return reportJsonl.toString().split('\n').filter(line => line.length).map(line => JSON.parse(line)) as JsonEvent[];
 }
 
+async function extractReportFromZip(file: string): Promise<Buffer> {
+  const zipFile = new ZipFile(file);
+  const entryNames = await zipFile.entries();
+  try {
+    for (const entryName of entryNames) {
+      if (entryName.endsWith('.jsonl'))
+        return await zipFile.read(entryName);
+    }
+  } finally {
+    zipFile.close();
+  }
+  throw new Error(`Cannot find *.jsonl file in ${file}`);
+}
+
 async function mergeEvents(dir: string, shardReportFiles: string[]) {
   const events: JsonEvent[] = [];
   const beginEvents: JsonEvent[] = [];
   const endEvents: JsonEvent[] = [];
   for (const reportFile of shardReportFiles) {
-    const reportJsonl = await fs.promises.readFile(path.join(dir, reportFile), 'utf8');
+    const reportJsonl = await extractReportFromZip(path.join(dir, reportFile));
     const parsedEvents = parseEvents(reportJsonl);
     for (const event of parsedEvents) {
       if (event.method === 'onBegin')
@@ -159,7 +174,7 @@ function mergeEndEvents(endEvents: JsonEvent[]): JsonEvent {
 
 async function sortedShardFiles(dir: string) {
   const files = await fs.promises.readdir(dir);
-  return files.filter(file => file.endsWith('.jsonl')).sort();
+  return files.filter(file => file.startsWith('report-') && file.endsWith('.zip')).sort();
 }
 
 class ProjectNamePatcher {
diff --git a/tests/playwright-test/reporter-blob.spec.ts b/tests/playwright-test/reporter-blob.spec.ts
index 19934913ad..1ad51d1d3c 100644
--- a/tests/playwright-test/reporter-blob.spec.ts
+++ b/tests/playwright-test/reporter-blob.spec.ts
@@ -148,7 +148,7 @@ test('should call methods in right order', async ({ runInlineTest, mergeReports
   await runInlineTest(files, { shard: `3/3` });
   const reportFiles = await fs.promises.readdir(reportDir);
   reportFiles.sort();
-  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-3.*.jsonl/), expect.stringMatching(/report-3-of-3.*.jsonl/), 'resources']);
+  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-3.*.zip/), expect.stringMatching(/report-3-of-3.*.zip/), 'resources']);
   const { exitCode, output } = await mergeReports(reportDir, {}, { additionalArgs: ['--reporter', test.info().outputPath('echo-reporter.js')] });
   expect(exitCode).toBe(0);
   const lines = output.split('\n').filter(l => l.trim().length);
@@ -212,7 +212,7 @@ test('should merge into html', async ({ runInlineTest, mergeReports, showReport,
     await runInlineTest(files, { shard: `${i + 1}/${totalShards}` });
   const reportFiles = await fs.promises.readdir(reportDir);
   reportFiles.sort();
-  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-3.*.jsonl/), expect.stringMatching(/report-2-of-3.*.jsonl/), expect.stringMatching(/report-3-of-3.*.jsonl/), 'resources']);
+  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-3.*.zip/), expect.stringMatching(/report-2-of-3.*.zip/), expect.stringMatching(/report-3-of-3.*.zip/), 'resources']);
   const { exitCode, output } = await mergeReports(reportDir, { 'PW_TEST_HTML_REPORT_OPEN': 'never' }, { additionalArgs: ['--reporter', 'html'] });
   expect(exitCode).toBe(0);
 
@@ -272,7 +272,7 @@ test('be able to merge incomplete shards', async ({ runInlineTest, mergeReports,
 
   const reportFiles = await fs.promises.readdir(reportDir);
   reportFiles.sort();
-  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-3.*.jsonl/), expect.stringMatching(/report-3-of-3.*.jsonl/), 'resources']);
+  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-3.*.zip/), expect.stringMatching(/report-3-of-3.*.zip/), 'resources']);
   const { exitCode } = await mergeReports(reportDir, { 'PW_TEST_HTML_REPORT_OPEN': 'never' }, { additionalArgs: ['--reporter', 'html'] });
   expect(exitCode).toBe(0);
 
@@ -378,7 +378,7 @@ test('merge into list report by default', async ({ runInlineTest, mergeReports }
     await runInlineTest(files, { shard: `${i + 1}/${totalShards}` });
   const reportFiles = await fs.promises.readdir(reportDir);
   reportFiles.sort();
-  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-3.*.jsonl/), expect.stringMatching(/report-2-of-3.*.jsonl/), expect.stringMatching(/report-3-of-3.*.jsonl/), 'resources']);
+  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-3.*.zip/), expect.stringMatching(/report-2-of-3.*.zip/), expect.stringMatching(/report-3-of-3.*.zip/), 'resources']);
   const { exitCode, output } = await mergeReports(reportDir, { PW_TEST_DEBUG_REPORTERS: '1', PW_TEST_DEBUG_REPORTERS_PRINT_STEPS: '1', PWTEST_TTY_WIDTH: '80' }, { additionalArgs: ['--reporter', 'list'] });
   expect(exitCode).toBe(0);
 
@@ -449,7 +449,7 @@ test('preserve attachments', async ({ runInlineTest, mergeReports, showReport, p
 
   const reportFiles = await fs.promises.readdir(reportDir);
   reportFiles.sort();
-  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-2.*.jsonl/), 'resources']);
+  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-2.*.zip/), 'resources']);
   const { exitCode } = await mergeReports(reportDir, { 'PW_TEST_HTML_REPORT_OPEN': 'never' }, { additionalArgs: ['--reporter', 'html'] });
   expect(exitCode).toBe(0);
 
@@ -512,7 +512,7 @@ test('generate html with attachment urls', async ({ runInlineTest, mergeReports,
 
   const reportFiles = await fs.promises.readdir(reportDir);
   reportFiles.sort();
-  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-2.*.jsonl/), 'resources']);
+  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-2.*.zip/), 'resources']);
   const { exitCode } = await mergeReports(reportDir, { 'PW_TEST_HTML_REPORT_OPEN': 'never' }, { additionalArgs: ['--reporter', 'html', '--attachments', 'missing'] });
   expect(exitCode).toBe(0);
 
@@ -586,7 +586,7 @@ test('resource names should not clash between runs', async ({ runInlineTest, sho
 
   const reportFiles = await fs.promises.readdir(reportDir);
   reportFiles.sort();
-  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-2.*.jsonl/), expect.stringMatching(/report-2-of-2.*.jsonl/), 'resources']);
+  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-2.*.zip/), expect.stringMatching(/report-2-of-2.*.zip/), 'resources']);
 
   const { exitCode } = await mergeReports(reportDir, {}, { additionalArgs: ['--reporter', 'html'] });
   expect(exitCode).toBe(0);
@@ -661,7 +661,7 @@ test('multiple output reports', async ({ runInlineTest, mergeReports, showReport
 
   const reportFiles = await fs.promises.readdir(reportDir);
   reportFiles.sort();
-  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-2.*.jsonl/), 'resources']);
+  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-2.*.zip/), 'resources']);
   const { exitCode, output } = await mergeReports(reportDir, { 'PW_TEST_HTML_REPORT_OPEN': 'never', 'PW_TEST_DEBUG_REPORTERS': '1' }, { additionalArgs: ['--reporter', 'html,line'] });
   expect(exitCode).toBe(0);
 
@@ -722,7 +722,7 @@ test('multiple output reports based on config', async ({ runInlineTest, mergeRep
 
   const reportFiles = await fs.promises.readdir(reportDir);
   reportFiles.sort();
-  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-2.*.jsonl/), expect.stringMatching(/report-2-of-2.*.jsonl/), 'resources']);
+  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-2.*.zip/), expect.stringMatching(/report-2-of-2.*.zip/), 'resources']);
   const { exitCode, output } = await mergeReports(reportDir, { 'PW_TEST_DEBUG_REPORTERS': '1' }, { additionalArgs: ['--config', test.info().outputPath('merged/playwright.config.ts')] });
   expect(exitCode).toBe(0);
 
@@ -737,7 +737,7 @@ test('multiple output reports based on config', async ({ runInlineTest, mergeRep
 
   // Check report presence.
   const mergedBlobReportFiles = await fs.promises.readdir(test.info().outputPath('merged/merged-blob'));
-  expect(mergedBlobReportFiles).toEqual([expect.stringMatching(/report.*.jsonl/), 'resources']);
+  expect(mergedBlobReportFiles).toEqual([expect.stringMatching(/report.*.zip/), 'resources']);
 });
 
 test('onError in the report', async ({ runInlineTest, mergeReports, showReport, page }) => {
@@ -868,7 +868,7 @@ test('preserve config fields', async ({ runInlineTest, mergeReports }) => {
 
   const reportFiles = await fs.promises.readdir(reportDir);
   reportFiles.sort();
-  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-3.*.jsonl/), expect.stringMatching(/report-3-of-3.*.jsonl/), 'resources']);
+  expect(reportFiles).toEqual([expect.stringMatching(/report-1-of-3.*.zip/), expect.stringMatching(/report-3-of-3.*.zip/), 'resources']);
   const { exitCode } = await mergeReports(reportDir, {}, { additionalArgs: ['--reporter', test.info().outputPath('echo-reporter.js'), '-c', test.info().outputPath('merge.config.ts')] });
   expect(exitCode).toBe(0);
   const json = JSON.parse(fs.readFileSync(test.info().outputPath('config.json')).toString());
@@ -1025,7 +1025,7 @@ test('preserve steps in html report', async ({ runInlineTest, mergeReports, show
   await runInlineTest(files);
   const reportFiles = await fs.promises.readdir(reportDir);
   reportFiles.sort();
-  expect(reportFiles).toEqual([expect.stringMatching(/report-.*.jsonl/), 'resources']);
+  expect(reportFiles).toEqual([expect.stringMatching(/report-.*.zip/), 'resources']);
   // Run merger in a different directory to make sure relative paths will not be resolved
   // relative to the current directory.
   const mergeCwd = test.info().outputPath('foo');