diff --git a/packages/cache/__tests__/tar.test.ts b/packages/cache/__tests__/tar.test.ts
index 0aa6c784..63bd69ef 100644
--- a/packages/cache/__tests__/tar.test.ts
+++ b/packages/cache/__tests__/tar.test.ts
@@ -95,7 +95,7 @@ test('gzip extract GNU tar on windows', async () => {
     jest.spyOn(fs, 'existsSync').mockReturnValueOnce(false)
 
     const isGnuMock = jest
-      .spyOn(utils, 'useGnuTar')
+      .spyOn(utils, 'isGnuTarInstalled')
       .mockReturnValue(Promise.resolve(true))
     const execMock = jest.spyOn(exec, 'exec')
     const archivePath = `${process.env['windir']}\\fakepath\\cache.tar`
diff --git a/packages/cache/src/internal/cacheUtils.ts b/packages/cache/src/internal/cacheUtils.ts
index bd698286..ed230426 100644
--- a/packages/cache/src/internal/cacheUtils.ts
+++ b/packages/cache/src/internal/cacheUtils.ts
@@ -83,8 +83,8 @@ async function getVersion(app: string): Promise<string> {
 
 // Use zstandard if possible to maximize cache performance
 export async function getCompressionMethod(): Promise<CompressionMethod> {
-  if (process.platform === 'win32') {
-    // Disable zstd on windows due to bug https://github.com/actions/cache/issues/301
+  if (process.platform === 'win32' && !isGnuTarInstalled()) {
+    // Disable zstd due to bug https://github.com/actions/cache/issues/301
     return CompressionMethod.Gzip
   } else {
     const versionOutput = await getVersion('zstd')
@@ -103,7 +103,7 @@ export function getCacheFileName(compressionMethod: CompressionMethod): string {
     : CacheFilename.Zstd
 }
 
-export async function useGnuTar(): Promise<boolean> {
+export async function isGnuTarInstalled(): Promise<boolean> {
   const versionOutput = await getVersion('tar')
   return versionOutput.toLowerCase().includes('gnu tar')
 }
diff --git a/packages/cache/src/internal/tar.ts b/packages/cache/src/internal/tar.ts
index 27fef40f..823139c1 100644
--- a/packages/cache/src/internal/tar.ts
+++ b/packages/cache/src/internal/tar.ts
@@ -5,23 +5,33 @@ import * as path from 'path'
 import * as utils from './cacheUtils'
 import {CompressionMethod} from './constants'
 
-async function getTarPath(args: string[]): Promise<string> {
-  // Explicitly use BSD Tar on Windows
+async function getTarPath(
+  args: string[],
+  compressionMethod: CompressionMethod
+): Promise<string> {
   const IS_WINDOWS = process.platform === 'win32'
   if (IS_WINDOWS) {
     const systemTar = `${process.env['windir']}\\System32\\tar.exe`
-    if (existsSync(systemTar)) {
+    if (compressionMethod !== CompressionMethod.Gzip) {
+      // We only use zstandard compression on windows when gnu tar is installed due to
+      // a bug with compressing large files with bsdtar + zstd
+      args.push('--force-local')
+    } else if (existsSync(systemTar)) {
       return systemTar
-    } else if (await utils.useGnuTar()) {
+    } else if (await utils.isGnuTarInstalled()) {
       args.push('--force-local')
     }
   }
   return await io.which('tar', true)
 }
 
-async function execTar(args: string[], cwd?: string): Promise<void> {
+async function execTar(
+  args: string[],
+  compressionMethod: CompressionMethod,
+  cwd?: string
+): Promise<void> {
   try {
-    await exec(`"${await getTarPath(args)}"`, args, {cwd})
+    await exec(`"${await getTarPath(args, compressionMethod)}"`, args, {cwd})
   } catch (error) {
     throw new Error(`Tar failed with error: ${error?.message}`)
   }
@@ -59,7 +69,7 @@ export async function extractTar(
     '-C',
     workingDirectory.replace(new RegExp(`\\${path.sep}`, 'g'), '/')
   ]
-  await execTar(args)
+  await execTar(args, compressionMethod)
 }
 
 export async function createTar(
@@ -100,5 +110,5 @@ export async function createTar(
     '--files-from',
     manifestFilename
   ]
-  await execTar(args, archiveFolder)
+  await execTar(args, compressionMethod, archiveFolder)
 }