diff --git a/build/package/mac_osx/pkg-dmg b/build/package/mac_osx/pkg-dmg
index 419db65ee4f..3cad08f5b9e 100755
--- a/build/package/mac_osx/pkg-dmg
+++ b/build/package/mac_osx/pkg-dmg
@@ -92,6 +92,8 @@ See B<--format>.
 
 The format to create the disk image in.  Valid values for I<format> are:
      - UDZO - zlib-compressed, read-only; extension I<.dmg>
+     - UDBZ - bzip2-compressed, read-only; extension I<.dmg>;
+              create and use on 10.4 ("Tiger") and later only
      - UDRW - read-write; extension I<.dmg>
      - UDSP - read-write, sparse; extension I<.sparseimage>
 
@@ -141,8 +143,8 @@ or to use formatted text, prepare a resource and use L<--resource>.
 
 =item B<--resource> I<file>
 
-A resource file to merge into I<target-image>.  If I<format> is UDZO,
-the disk image will be flattened to a single-fork file that contains
+A resource file to merge into I<target-image>.  If I<format> is UDZO or
+UDBZ, the disk image will be flattened to a single-fork file that contains
 the resource but may be freely transferred without any special encodings.
 I<file> must be in a format suitable for L<Rez(1)>.  See L<Rez(1)> for a
 description of the format, and L<hdiutil(1)> for a discussion on flattened
@@ -273,6 +275,7 @@ sub commandVerbosity($@);
 sub diskImageMaker($$$$$$$$);
 sub giveExtension($$);
 sub hdidMountImage($@);
+sub isFormatCompressed($);
 sub licenseMaker($$);
 sub pathSplit($);
 sub setAttributes($@);
@@ -605,7 +608,7 @@ if(defined($iconFile)) {
   # It's pointless to set the attributes of the root when diskutil create
   # -srcfolder is being used.  In that case, the attributes will be set
   # later, after the image is already created.
-  if($outputFormat eq 'UDZO' &&
+  if(isFormatCompressed($outputFormat) &&
    (command($gConfig{'cmd_SetFile'}, '-a', 'C', $tempRoot) != 0)) {
     cleanupDie('SetFile failed');
   }
@@ -617,7 +620,7 @@ if(command($gConfig{'cmd_chmod'}, '-R', 'a+rX,a-st,u+w,go-w',
 }
 
 my($unflattenable);
-if($outputFormat eq 'UDZO') {
+if(isFormatCompressed($outputFormat)) {
   $unflattenable = 1;
 }
 else {
@@ -865,7 +868,7 @@ sub diskImageMaker($$$$$$$$) {
    $tempDir, $tempMount);
   ($source, $destination, $format, $name, $tempDir, $tempMount,
    $baseName, $setRootIcon) = @_;
-  if($format eq 'UDZO') {
+  if(isFormatCompressed($format)) {
     my($uncompressedImage);
 
     if($gConfig{'makehybrid'}) {
@@ -942,10 +945,11 @@ sub diskImageMaker($$$$$$$$) {
     }
     else {
       # makehybrid is not available, fall back to making a UDRW and
-      # converting to UDZO.  It ought to be possible to do a UDZO directly,
-      # but those come out far too large (journaling?) and need to be
-      # read-write to fix up the volume icon anyway.  Luckily, we can
-      # take advantage of a single call back into this function.
+      # converting to a compressed image.  It ought to be possible to
+      # create a compressed image directly, but those come out far too
+      # large (journaling?) and need to be read-write to fix up the
+      # volume icon anyway.  Luckily, we can take advantage of a single
+      # call back into this function.
       my($udrwImage);
       $udrwImage = giveExtension($tempDir.'/udrw', '.dmg');
 
@@ -960,8 +964,12 @@ sub diskImageMaker($$$$$$$$) {
     # The uncompressed disk image is now in its final form.  Compress it.
     # Jaguar doesn't support hdiutil convert -ov, but it always allows
     # overwriting.
-    if(command($gConfig{'cmd_hdiutil'}, 'convert', '-format', 'UDZO',
-     '-imagekey', 'zlib-level=9', 
+    # bzip2-compressed UDBZ images can only be created and mounted on 10.4
+    # and later.  The bzip2-level imagekey is only effective when creating
+    # images in 10.5.  In 10.4, bzip2-level is harmlessly ignored, and the
+    # default value of 1 is always used.
+    if(command($gConfig{'cmd_hdiutil'}, 'convert', '-format', $format,
+     '-imagekey', ($format eq 'UDBZ' ? 'bzip2-level=9' : 'zlib-level=9'),
      (defined($gDarwinMajor) && $gDarwinMajor <= 6 ? () : ('-ov')),
      $uncompressedImage, '-o', $destination) != 0) {
       cleanupDie('hdiutil convert failed');
@@ -976,8 +984,8 @@ sub diskImageMaker($$$$$$$$) {
       cleanupDie('unlink uncompressedImage failed: '.$!);
     }
 
-    # At this point, the only thing that the UDZO block has added to the
-    # cleanup stack is the removal of $destination.  $source has already
+    # At this point, the only thing that the compressed block has added to
+    # the cleanup stack is the removal of $destination.  $source has already
     # been removed, and its cleanup entry has been removed as well.
   }
   elsif($format eq 'UDRW' || $format eq 'UDSP') {
@@ -1247,6 +1255,16 @@ sub hdidMountImage($@) {
   return undef;
 }
 
+# isFormatCompressed($format)
+#
+# Returns true if $format corresponds to a compressed disk image format.
+# Returns false otherwise.
+sub isFormatCompressed($) {
+  my($format);
+  ($format) = @_;
+  return $format eq 'UDZO' || $format eq 'UDBZ';
+}
+
 # licenseMaker($text, $resource)
 #
 # Takes a plain text file at path $text and creates a license agreement