A system and method for transparently compressing file system data using compression group descriptors is provided. When data contained within a compression group be compressed beyond a predefined threshold value, a compression group descriptor is included in the compression group that signifies that the data for the group of level 0 blocks is compressed into a lesser number of physical data blocks. When performing a read operation, the file system first determines the appropriate compression group that contains the desired data and determines whether the compression group has been compressed. If so, the file system decompresses the data in the compression group before returning the decompressed data. If the magic value is not the first pointer position, then the data within the compression group was previously stored in an uncompressed format, and the data may be returned without performing a decompression operation.