diff --git a/go/mysql/binlog_event_compression.go b/go/mysql/binlog_event_compression.go
index 7455218d4b5..37d28431087 100644
--- a/go/mysql/binlog_event_compression.go
+++ b/go/mysql/binlog_event_compression.go
@@ -98,6 +98,11 @@ type TransactionPayload struct {
 	payload          []byte
 	reader           io.Reader
 	iterator         func() (BinlogEvent, error)
+	// StreamingContents tells the consumer that we are streaming the
+	// decompressed payload and they should also stream the events.
+	// This ensures that neither the producer nor the consumer are
+	// holding the entire payload's contents in memory.
+	StreamingContents bool
 }
 
 // IsTransactionPayload returns true if a compressed transaction
@@ -292,6 +297,8 @@ func (tp *TransactionPayload) decompress() error {
 		}
 		compressedTrxPayloadsUsingStream.Add(1)
 		tp.reader = streamDecoder
+		// Signal the consumer to also stream the contents.
+		tp.StreamingContents = true
 		return nil
 	}
 
diff --git a/go/mysql/binlog_event_mysql56_test.go b/go/mysql/binlog_event_mysql56_test.go
index 861d98c6e4f..5844779de63 100644
--- a/go/mysql/binlog_event_mysql56_test.go
+++ b/go/mysql/binlog_event_mysql56_test.go
@@ -186,9 +186,11 @@ func TestMysql56DecodeTransactionPayload(t *testing.T) {
 			}
 		}
 		if tc.inMemory {
+			require.False(t, tp.StreamingContents)
 			require.Equal(t, memDecodingCnt+1, compressedTrxPayloadsInMem.Get())
 			require.Equal(t, tc.want, eventStrs)
 		} else {
+			require.True(t, tp.StreamingContents)
 			require.Equal(t, streamDecodingCnt+1, compressedTrxPayloadsUsingStream.Get())
 			require.Len(t, eventStrs, len(tc.want))
 			totalSize := 0
diff --git a/go/vt/vttablet/tabletserver/vstreamer/vstreamer.go b/go/vt/vttablet/tabletserver/vstreamer/vstreamer.go
index ea7f75cdc38..59db723ff2b 100644
--- a/go/vt/vttablet/tabletserver/vstreamer/vstreamer.go
+++ b/go/vt/vttablet/tabletserver/vstreamer/vstreamer.go
@@ -375,7 +375,7 @@ func (vs *vstreamer) parseEvents(ctx context.Context, events <-chan mysql.Binlog
 				}
 				return fmt.Errorf("unexpected server EOF")
 			}
-			vevents, err := vs.parseEvent(ev)
+			vevents, err := vs.parseEvent(ev, bufferAndTransmit)
 			if err != nil {
 				vs.vse.errorCounts.Add("ParseEvent", 1)
 				return err
@@ -416,7 +416,11 @@ func (vs *vstreamer) parseEvents(ctx context.Context, events <-chan mysql.Binlog
 }
 
 // parseEvent parses an event from the binlog and converts it to a list of VEvents.
-func (vs *vstreamer) parseEvent(ev mysql.BinlogEvent) ([]*binlogdatapb.VEvent, error) {
+// The bufferAndTransmit function must be passed if the event is a TransactionPayloadEvent
+// as for larger payloads (> ZstdInMemoryDecompressorMaxSize) the internal events need
+// to be streamed directly here in order to avoid holding the entire payload's contents,
+// which can be 10s or even 100s of GiBs, all in memory.
+func (vs *vstreamer) parseEvent(ev mysql.BinlogEvent, bufferAndTransmit func(vevent *binlogdatapb.VEvent) error) ([]*binlogdatapb.VEvent, error) {
 	if !ev.IsValid() {
 		return nil, fmt.Errorf("can't parse binlog event: invalid data: %#v", ev)
 	}
@@ -672,11 +676,31 @@ func (vs *vstreamer) parseEvent(ev mysql.BinlogEvent) ([]*binlogdatapb.VEvent, e
 				}
 				return nil, err
 			}
-			tpvevents, err := vs.parseEvent(tpevent)
+			tpvevents, err := vs.parseEvent(tpevent, nil) // Parse the internal event
 			if err != nil {
 				return nil, vterrors.Wrap(err, "failed to parse transaction payload's internal event")
 			}
-			vevents = append(vevents, tpvevents...)
+			if tp.StreamingContents {
+				// Transmit each internal event individually to avoid buffering
+				// the large transaction's entire payload of events in memory, as
+				// the uncompressed size can be 10s or even 100s of GiBs in size.
+				if bufferAndTransmit == nil {
+					return nil, vterrors.New(vtrpcpb.Code_INTERNAL, "[bug] cannot stream compressed transaction payload's internal events as no bufferAndTransmit function was provided")
+				}
+				for _, tpvevent := range tpvevents {
+					tpvevent.Timestamp = int64(ev.Timestamp())
+					tpvevent.CurrentTime = time.Now().UnixNano()
+					if err := bufferAndTransmit(tpvevent); err != nil {
+						if err == io.EOF {
+							return nil, nil
+						}
+						vs.vse.errorCounts.Add("TransactionPayloadBufferAndTransmit", 1)
+						return nil, vterrors.Errorf(vtrpcpb.Code_INTERNAL, "error sending compressed transaction payload's internal event: %v", err)
+					}
+				}
+			} else { // Process the payload's internal events all at once
+				vevents = append(vevents, tpvevents...)
+			}
 		}
 		vs.vse.vstreamerCompressedTransactionsDecoded.Add(1)
 	}