diff --git a/fs/squashfs/Config.in b/fs/squashfs/Config.in
index 6cc8fcae00..bcc93b9256 100644
--- a/fs/squashfs/Config.in
+++ b/fs/squashfs/Config.in
@@ -2,3 +2,22 @@ config BR2_TARGET_ROOTFS_SQUASHFS
 	bool "squashfs root filesystem"
 	help
 	  Build a squashfs root filesystem
+
+if BR2_TARGET_ROOTFS_SQUASHFS
+choice
+	prompt "SquashFS version"
+	default BR2_TARGET_ROOTFS_SQUASHFS4
+	help
+	  Select the Squash filesystem version to use to generate the
+	  root filesystem.
+
+config BR2_TARGET_ROOTFS_SQUASHFS4
+       bool "4.x"
+
+config BR2_TARGET_ROOTFS_SQUASHFS3
+       depends on BR2_DEPRECATED
+       bool "3.x"
+
+endchoice
+endif
+
diff --git a/fs/squashfs/squashfs.mk b/fs/squashfs/squashfs.mk
index d72388ebf2..f11ba20900 100644
--- a/fs/squashfs/squashfs.mk
+++ b/fs/squashfs/squashfs.mk
@@ -4,7 +4,11 @@
 #
 #############################################################
 
+ifeq ($(BR2_TARGET_ROOTFS_SQUASHFS4),y)
 ROOTFS_SQUASHFS_DEPENDENCIES = host-squashfs
+else
+ROOTFS_SQUASHFS_DEPENDENCIES = host-squashfs3
+endif
 
 define ROOTFS_SQUASHFS_CMD
 	$(HOST_DIR)/usr/bin/mksquashfs $(TARGET_DIR) $$@ -noappend
diff --git a/package/Config.in b/package/Config.in
index 0dac9498f2..877a87e81c 100644
--- a/package/Config.in
+++ b/package/Config.in
@@ -189,6 +189,7 @@ source "package/sfdisk/Config.in"
 endif
 source "package/smartmontools/Config.in"
 source "package/squashfs/Config.in"
+source "package/squashfs3/Config.in"
 source "package/sshfs/Config.in"
 source "package/sysstat/Config.in"
 if BR2_PACKAGE_BUSYBOX_SHOW_OTHERS
diff --git a/package/squashfs3/Config.in b/package/squashfs3/Config.in
new file mode 100644
index 0000000000..2f7033dd83
--- /dev/null
+++ b/package/squashfs3/Config.in
@@ -0,0 +1,7 @@
+config BR2_PACKAGE_SQUASHFS3
+	bool "squashfs3"
+	depends on BR2_DEPRECATED
+	help
+	  Tools to generate SquashFS 3.x filesystems.
+
+	  http://squashfs.sourceforge.net/
diff --git a/package/squashfs3/squashfs-3.4-build-system-fix.patch b/package/squashfs3/squashfs-3.4-build-system-fix.patch
new file mode 100644
index 0000000000..5b86b008a0
--- /dev/null
+++ b/package/squashfs3/squashfs-3.4-build-system-fix.patch
@@ -0,0 +1,28 @@
+[PATCH]: squashfs-tools: Handle user supplied CFLAGS/LDFLAGS
+
+Properly handle make CFLAGS=.. LDFLAGS=..
+
+Signed-off-by: Peter Korsgaard <jacmet@sunsite.dk>
+---
+ squashfs-tools/Makefile |    4 ++--
+ 1 file changed, 2 insertions(+), 2 deletions(-)
+
+Index: squashfs3.4/squashfs-tools/Makefile
+===================================================================
+--- squashfs3.4.orig/squashfs-tools/Makefile
++++ squashfs3.4/squashfs-tools/Makefile
+@@ -2,12 +2,12 @@ INSTALL_DIR = /usr/local/bin
+ 
+ INCLUDEDIR = .
+ 
+-CFLAGS := -I$(INCLUDEDIR) -D_FILE_OFFSET_BITS=64 -D_LARGEFILE_SOURCE -D_GNU_SOURCE -O2
++override CFLAGS += -I$(INCLUDEDIR) -D_FILE_OFFSET_BITS=64 -D_LARGEFILE_SOURCE -D_GNU_SOURCE -O2
+ 
+ all: mksquashfs unsquashfs
+ 
+ mksquashfs: mksquashfs.o read_fs.o sort.o
+-	$(CC) mksquashfs.o read_fs.o sort.o -lz -lpthread -lm -o $@
++	$(CC) $(LDFLAGS) mksquashfs.o read_fs.o sort.o -lz -lpthread -lm -o $@
+ 
+ mksquashfs.o: mksquashfs.c squashfs_fs.h mksquashfs.h global.h sort.h
+ 
diff --git a/package/squashfs3/squashfs3.mk b/package/squashfs3/squashfs3.mk
new file mode 100644
index 0000000000..5504b14263
--- /dev/null
+++ b/package/squashfs3/squashfs3.mk
@@ -0,0 +1,30 @@
+SQUASHFS3_VERSION=3.4
+SQUASHFS3_SOURCE=squashfs$(SQUASHFS3_VERSION).tar.gz
+SQUASHFS3_SITE=http://$(BR2_SOURCEFORGE_MIRROR).dl.sourceforge.net/sourceforge/squashfs
+
+SQUASHFS3_DEPENDENCIES = zlib
+HOST_SQUASHFS3_DEPENDENCIES = host-zlib
+
+define SQUASHFS3_BUILD_CMDS
+ $(TARGET_MAKE_ENV) $(MAKE)    \
+   CC="$(TARGET_CC)"           \
+   CFLAGS="$(TARGET_CFLAGS)"   \
+   LDFLAGS="$(TARGET_LDFLAGS)" \
+   -C $(@D)/squashfs-tools/
+endef
+
+define SQUASHFS3_INSTALL_TARGET_CMDS
+ $(TARGET_MAKE_ENV) $(MAKE) -C $(@D)/squashfs-tools/ INSTALL_DIR=$(TARGET_DIR)/usr/bin install
+endef
+
+define HOST_SQUASHFS3_BUILD_CMDS
+ $(HOST_MAKE_ENV) $(MAKE) -C $(@D)/squashfs-tools/
+endef
+
+define HOST_SQUASHFS3_INSTALL_CMDS
+ $(HOST_MAKE_ENV) $(MAKE) -C $(@D)/squashfs-tools/ INSTALL_DIR=$(HOST_DIR)/usr/bin install
+endef
+
+$(eval $(call GENTARGETS,package,squashfs3))
+$(eval $(call GENTARGETS,package,squashfs3,host))
+