diff --git a/0001-Use-block-size-with-xz-to-make-seekable-xz-compresse.patch b/0001-Use-block-size-with-xz-to-make-seekable-xz-compresse.patch
new file mode 100644
index 0000000..28d5841
--- /dev/null
+++ b/0001-Use-block-size-with-xz-to-make-seekable-xz-compresse.patch
@@ -0,0 +1,27 @@
+From fe2609302233148b8c670417748c0f036092c3d7 Mon Sep 17 00:00:00 2001
+From: Neal Gompa <ngompa13@gmail.com>
+Date: Sun, 12 Mar 2017 18:20:49 -0400
+Subject: [PATCH] Use --block-size with xz to make seekable xz-compressed
+ images (rhbz#984704)
+
+---
+ appcreate/appliance.py | 3 ++-
+ 1 file changed, 2 insertions(+), 1 deletion(-)
+
+diff --git a/appcreate/appliance.py b/appcreate/appliance.py
+index e489494..61f1c46 100644
+--- a/appcreate/appliance.py
++++ b/appcreate/appliance.py
+@@ -643,7 +643,8 @@ class ApplianceImageCreator(ImageCreator):
+                 dst = "%s/%s-%s.%s" % (self._outdir, self.name, name, self.__disk_format)
+ 
+                 if self.__compress:
+-                    rc = subprocess.call(["xz", "-z", src])
++                    # Compress with xz using 16 MiB block size for seekability
++                    rc = subprocess.call(["xz", "-z", "--block-size=16777216", src])
+                     if rc == 0:
+                         logging.debug("compression successful")
+                     if rc != 0:
+-- 
+2.9.3
+
diff --git a/appliance-tools.spec b/appliance-tools.spec
index cbbf31c..f38b993 100644
--- a/appliance-tools.spec
+++ b/appliance-tools.spec
@@ -1,7 +1,7 @@
 Name: appliance-tools
 Summary: Tools for building Appliances
 Version: 008.0
-Release: 3%{?dist}
+Release: 4%{?dist}
 License: GPLv2
 Group: System Environment/Base
 URL: https://pagure.io/appliance-tools
@@ -11,6 +11,7 @@ Source0: https://releases.pagure.org/%{name}/%{name}-%{version}.tar.bz2
 # Patches backported from upstream
 Patch0: 0001-Set-releasever.patch
 Patch1: 0002-Make-it-possible-to-disable-compression.patch
+Patch3: 0001-Use-block-size-with-xz-to-make-seekable-xz-compresse.patch
 
 # Ensure system deps are installed (rhbz#1409536)
 Requires: python2-imgcreate >= 1:24.0-3
@@ -55,6 +56,9 @@ rm -fv %{buildroot}%{_pkgdocdir}/COPYING
 %{python2_sitelib}/ec2convert/*
 
 %changelog
+* Sun Mar 12 2017 Neal Gompa <ngompa13@gmail.com> - 008.0-4
+- Use 16 MiB block size for xz compression (#984704)
+
 * Tue Feb 28 2017 Neal Gompa <ngompa13@gmail.com> - 008.0-3
 - Backport patches to make more RPi friendly (#1270606)