diff --git a/src/debug_toolbar/litestar/middleware.py b/src/debug_toolbar/litestar/middleware.py
index ff4658b..4bf6d60 100644
--- a/src/debug_toolbar/litestar/middleware.py
+++ b/src/debug_toolbar/litestar/middleware.py
@@ -2,6 +2,7 @@
 
 from __future__ import annotations
 
+import gzip
 import logging
 import re
 import time
@@ -190,20 +191,27 @@ async def _handle_response_body(
     async def _send_html_response(self, send: Send, context: RequestContext, state: ResponseState) -> None:
         """Process and send buffered HTML response with toolbar injection."""
         full_body = b"".join(state.body_chunks)
+        content_encoding = state.headers.get("content-encoding", "")
 
         try:
             await self.toolbar.process_response(context)
-            modified_body = self._inject_toolbar(full_body, context)
+            modified_body, new_encoding = self._inject_toolbar(full_body, context, content_encoding)
             server_timing = self.toolbar.get_server_timing_header(context)
         except Exception:
             logger.debug("Toolbar processing failed, sending original response", exc_info=True)
             modified_body = full_body
+            new_encoding = content_encoding
             server_timing = None
 
+        # Build headers, excluding content-length (recalculated) and content-encoding (may have changed)
+        excluded_headers = {"content-length", "content-encoding"}
         new_headers: list[tuple[bytes, bytes]] = [
-            (k.encode(), v.encode()) for k, v in state.headers.items() if k.lower() != "content-length"
+            (k.encode(), v.encode()) for k, v in state.headers.items() if k.lower() not in excluded_headers
         ]
         new_headers.append((b"content-length", str(len(modified_body)).encode()))
+        # Only add content-encoding if we still have one (not stripped due to decompression)
+        if new_encoding:
+            new_headers.append((b"content-encoding", new_encoding.encode()))
         if server_timing:
             new_headers.append((b"server-timing", server_timing.encode()))
 
@@ -471,20 +479,39 @@ def _populate_routes_metadata(self, request: Request, context: RequestContext) -
             context.metadata["routes"] = []
             context.metadata["matched_route"] = ""
 
-    def _inject_toolbar(self, body: bytes, context: RequestContext) -> bytes:
+    def _inject_toolbar(self, body: bytes, context: RequestContext, content_encoding: str = "") -> tuple[bytes, str]:
         """Inject the toolbar HTML into the response body.
 
         Args:
-            body: The original response body.
+            body: The original response body (may be compressed).
             context: The request context with collected data.
+            content_encoding: The content-encoding header value (e.g., "gzip").
 
         Returns:
-            The modified response body with toolbar injected.
+            Tuple of (modified body, content_encoding to use).
+            If gzip was decompressed, returns uncompressed body with empty encoding.
         """
+        # Handle gzip-compressed responses
+        # Track whether we successfully decompressed the body
+        decompressed = False
+        encodings = [e.strip() for e in content_encoding.lower().split(",")] if content_encoding else []
+        if "gzip" in encodings:
+            try:
+                body = gzip.decompress(body)
+                decompressed = True
+            except gzip.BadGzipFile:
+                # Not valid gzip, try to decode as-is
+                pass
+
         try:
             html = body.decode("utf-8")
         except UnicodeDecodeError:
-            return body
+            # Can't decode. If we successfully decompressed gzip, return the
+            # decompressed body with no content-encoding. Otherwise, return
+            # the body as-is with the original encoding.
+            if decompressed:
+                return body, ""
+            return body, content_encoding
 
         toolbar_data = self.toolbar.get_toolbar_data(context)
         toolbar_html = self._render_toolbar(toolbar_data)
@@ -496,7 +523,10 @@ def _inject_toolbar(self, body: bytes, context: RequestContext) -> bytes:
             pattern = re.compile(re.escape(insert_before), re.IGNORECASE)
             html = pattern.sub(toolbar_html + insert_before, html, count=1)
 
-        return html.encode("utf-8")
+        # Return body as uncompressed UTF-8 with empty content-encoding.
+        # This applies to all successful toolbar injections, regardless of whether
+        # the input was originally compressed (we decompress before processing).
+        return html.encode("utf-8"), ""
 
     def _render_toolbar(self, data: dict[str, Any]) -> str:
         """Render the toolbar HTML.
diff --git a/tests/integration/test_litestar_middleware.py b/tests/integration/test_litestar_middleware.py
index 870f59c..8a92396 100644
--- a/tests/integration/test_litestar_middleware.py
+++ b/tests/integration/test_litestar_middleware.py
@@ -2,11 +2,14 @@
 
 from __future__ import annotations
 
+import gzip
+
 import pytest
 from litestar.testing import TestClient
 
 from debug_toolbar.litestar import DebugToolbarPlugin, LitestarDebugToolbarConfig
-from litestar import Litestar, MediaType, get
+from litestar import Litestar, MediaType, Response, get
+from litestar.status_codes import HTTP_200_OK
 
 
 @get("/", media_type=MediaType.HTML)
@@ -298,3 +301,158 @@ async def after_request(response: Response) -> Response:
             assert response.status_code == 200
             assert b"debug-toolbar" in response.content
             assert hook_state["before"], "before_request hook was not called"
+
+
+class TestGzipCompression:
+    """Test toolbar injection with gzip-compressed responses."""
+
+    def test_toolbar_injected_with_gzip_compression(self) -> None:
+        """Test that toolbar is correctly injected when response is gzip-compressed.
+
+        This tests the fix for the issue where gzip-compressed responses would
+        fail to have the toolbar injected because the middleware couldn't decode
+        the compressed bytes as UTF-8.
+        """
+        from litestar.config.compression import CompressionConfig
+
+        config = LitestarDebugToolbarConfig(enabled=True)
+        app = Litestar(
+            route_handlers=[html_handler],
+            plugins=[DebugToolbarPlugin(config)],
+            compression_config=CompressionConfig(backend="gzip", minimum_size=1),
+            debug=True,
+        )
+        with TestClient(app) as client:
+            # Request with Accept-Encoding to trigger compression
+            response = client.get("/", headers={"Accept-Encoding": "gzip"})
+            assert response.status_code == 200
+            # At the TestClient level we see an uncompressed body with the toolbar injected.
+            assert b"debug-toolbar" in response.content
+            assert b"</body>" in response.content
+
+    def test_toolbar_injected_without_compression(self) -> None:
+        """Test that toolbar injection still works without compression."""
+        config = LitestarDebugToolbarConfig(enabled=True)
+        app = Litestar(
+            route_handlers=[html_handler],
+            plugins=[DebugToolbarPlugin(config)],
+            debug=True,
+        )
+        with TestClient(app) as client:
+            response = client.get("/")
+            assert response.status_code == 200
+            assert b"debug-toolbar" in response.content
+
+    def test_invalid_gzip_data_with_gzip_header(self) -> None:
+        """Test handling of invalid gzip data with content-encoding: gzip header.
+
+        When the response claims to be gzipped but contains invalid gzip data,
+        the middleware should gracefully fall back to treating it as uncompressed.
+        """
+
+        @get("/invalid-gzip", media_type=MediaType.HTML)
+        async def invalid_gzip_handler() -> Response:
+            """Return invalid gzip data with gzip content-encoding header."""
+            # This is not valid gzip data
+            invalid_gzip = b"This is not gzipped data but pretends to be"
+            return Response(
+                content=invalid_gzip,
+                status_code=HTTP_200_OK,
+                media_type=MediaType.HTML,
+                headers={"content-encoding": "gzip"},
+            )
+
+        config = LitestarDebugToolbarConfig(enabled=True)
+        app = Litestar(
+            route_handlers=[invalid_gzip_handler],
+            plugins=[DebugToolbarPlugin(config)],
+            debug=True,
+        )
+        with TestClient(app) as client:
+            response = client.get("/invalid-gzip")
+            assert response.status_code == 200
+            # Should return original content since it couldn't be decompressed
+            assert b"This is not gzipped data but pretends to be" in response.content
+
+    def test_gzip_decompressed_data_fails_utf8_decoding(self) -> None:
+        """Test handling of valid gzip data that fails UTF-8 decoding after decompression.
+
+        When gzipped data decompresses successfully but contains non-UTF-8 bytes,
+        the middleware should return the original compressed data.
+        """
+
+        @get("/binary-gzip", media_type=MediaType.HTML)
+        async def binary_gzip_handler() -> Response:
+            """Return gzipped binary data that's not valid UTF-8."""
+            # Binary data that's not valid UTF-8
+            binary_data = b"\x80\x81\x82\x83\x84\x85\x86\x87\x88\x89"
+            gzipped = gzip.compress(binary_data)
+            return Response(
+                content=gzipped,
+                status_code=HTTP_200_OK,
+                media_type=MediaType.HTML,
+                headers={"content-encoding": "gzip"},
+            )
+
+        config = LitestarDebugToolbarConfig(enabled=True)
+        app = Litestar(
+            route_handlers=[binary_gzip_handler],
+            plugins=[DebugToolbarPlugin(config)],
+            debug=True,
+        )
+        with TestClient(app) as client:
+            response = client.get("/binary-gzip")
+            assert response.status_code == 200
+            # Should return decompressed binary data since UTF-8 decode failed
+            # The middleware has removed the gzip encoding, so we check for the raw binary content
+            assert response.content == b"\x80\x81\x82\x83\x84\x85\x86\x87\x88\x89"
+
+    def test_gzip_header_case_insensitive(self) -> None:
+        """Test that content-encoding header matching is case-insensitive.
+
+        The HTTP spec requires header names to be case-insensitive, so we should
+        handle various casings of "gzip" (e.g., "GZIP", "Gzip", "GzIp").
+        """
+
+        @get("/gzip-upper", media_type=MediaType.HTML)
+        async def gzip_upper_handler() -> Response:
+            """Return gzipped HTML with uppercase GZIP encoding."""
+            html = "<html><body><h1>Test</h1></body></html>"
+            gzipped = gzip.compress(html.encode("utf-8"))
+            return Response(
+                content=gzipped,
+                status_code=HTTP_200_OK,
+                media_type=MediaType.HTML,
+                headers={"content-encoding": "GZIP"},
+            )
+
+        @get("/gzip-mixed", media_type=MediaType.HTML)
+        async def gzip_mixed_handler() -> Response:
+            """Return gzipped HTML with mixed case GzIp encoding."""
+            html = "<html><body><h1>Test</h1></body></html>"
+            gzipped = gzip.compress(html.encode("utf-8"))
+            return Response(
+                content=gzipped,
+                status_code=HTTP_200_OK,
+                media_type=MediaType.HTML,
+                headers={"content-encoding": "GzIp"},
+            )
+
+        config = LitestarDebugToolbarConfig(enabled=True)
+        app = Litestar(
+            route_handlers=[gzip_upper_handler, gzip_mixed_handler],
+            plugins=[DebugToolbarPlugin(config)],
+            debug=True,
+        )
+        with TestClient(app) as client:
+            # Test uppercase GZIP
+            response = client.get("/gzip-upper")
+            assert response.status_code == 200
+            assert b"debug-toolbar" in response.content
+            assert b"</body>" in response.content
+
+            # Test mixed case GzIp
+            response = client.get("/gzip-mixed")
+            assert response.status_code == 200
+            assert b"debug-toolbar" in response.content
+            assert b"</body>" in response.content