diff --git a/src/bpm/main.go b/src/bpm/main.go
index 9ff4a10..f3c807b 100644
--- a/src/bpm/main.go
+++ b/src/bpm/main.go
@@ -8,6 +8,7 @@ import (
 	"git.enumerated.dev/bubble-package-manager/bpm/src/bpmlib"
 	"log"
 	"os"
+	"path"
 	"path/filepath"
 	"slices"
 	"strings"
@@ -62,6 +63,7 @@ const (
 	remove
 	cleanup
 	file
+	compile
 )
 
 func getCommandType() commandType {
@@ -86,6 +88,8 @@ func getCommandType() commandType {
 		return cleanup
 	case "file":
 		return file
+	case "compile":
+		return compile
 	default:
 		return help
 	}
@@ -543,6 +547,51 @@ func resolveCommand() {
 				}
 			}
 		}
+	case compile:
+		if len(subcommandArgs) == 0 {
+			fmt.Println("No source packages were given")
+			return
+		}
+
+		// Read local databases
+		err := bpmlib.ReadLocalDatabases()
+		if err != nil {
+			log.Fatalf("Error: could not read local databases: %s", err)
+		}
+
+		// Compile packages
+		for _, sourcePackage := range subcommandArgs {
+			if _, err := os.Stat(sourcePackage); os.IsNotExist(err) {
+				log.Fatalf("Error: file (%s) does not exist!", sourcePackage)
+			}
+
+			// Read archive
+			bpmpkg, err := bpmlib.ReadPackage(sourcePackage)
+			if err != nil {
+				log.Fatalf("Could not read package (%s): %s", sourcePackage, err)
+			}
+
+			// Ensure archive is source BPM package
+			if bpmpkg.PkgInfo.Type != "source" {
+				log.Fatalf("Error: cannot compile a non-source package!")
+			}
+
+			// Get current working directory
+			workdir, err := os.Getwd()
+			if err != nil {
+				log.Fatalf("Error: could not get working directory: %s", err)
+			}
+
+			outputFilename := fmt.Sprintf(path.Join(workdir, "%s-%s-%d.bpm"), bpmpkg.PkgInfo.Name, bpmpkg.PkgInfo.Version, bpmpkg.PkgInfo.Revision)
+
+			err = bpmlib.CompileSourcePackage(sourcePackage, outputFilename)
+			if err != nil {
+				log.Fatalf("Error: could not compile source package (%s): %s", sourcePackage, err)
+			}
+
+			fmt.Printf("Package (%s) was successfully compiled! Binary package generated at: %s\n", sourcePackage, outputFilename)
+		}
+
 	default:
 		printHelp()
 	}
diff --git a/src/bpmlib/compilation.go b/src/bpmlib/compilation.go
new file mode 100644
index 0000000..be677e4
--- /dev/null
+++ b/src/bpmlib/compilation.go
@@ -0,0 +1,185 @@
+package bpmlib
+
+import (
+	"errors"
+	"fmt"
+	"gopkg.in/yaml.v3"
+	"io"
+	"os"
+	"os/exec"
+	"path"
+	"strconv"
+)
+
+func CompileSourcePackage(archiveFilename, outputFilename string) (err error) {
+	// Read BPM archive
+	bpmpkg, err := ReadPackage(archiveFilename)
+	if err != nil {
+		return err
+	}
+
+	// Ensure package type is 'source'
+	if bpmpkg.PkgInfo.Type != "source" {
+		return errors.New("cannot compile a non-source package")
+	}
+
+	// Get HOME directory
+	homeDir, err := os.UserHomeDir()
+	if err != nil {
+		return err
+	}
+
+	tempDirectory := path.Join(homeDir, ".cache/bpm/compilation/", bpmpkg.PkgInfo.Name)
+
+	// Ensure temporary directory does not exist
+	if _, err := os.Stat(tempDirectory); err == nil {
+		err := os.RemoveAll(tempDirectory)
+		if err != nil {
+			return err
+		}
+	}
+
+	// Create temporary directory
+	err = os.MkdirAll(tempDirectory, 0755)
+	if err != nil {
+		return err
+	}
+
+	// Extract source.sh file
+	content, err := readTarballContent(archiveFilename, "source.sh")
+	if err != nil {
+		return err
+	}
+	sourceFile, err := os.Create(path.Join(tempDirectory, "source.sh"))
+	if err != nil {
+		return err
+	}
+	_, err = io.Copy(sourceFile, content.tarReader)
+	if err != nil {
+		return err
+	}
+	err = sourceFile.Close()
+	if err != nil {
+		return err
+	}
+	err = content.file.Close()
+	if err != nil {
+		return err
+	}
+
+	// Extract source files
+	err = extractTarballDirectory(archiveFilename, "source-files", tempDirectory)
+	if err != nil {
+		return err
+	}
+
+	// Create source directory
+	err = os.Mkdir(path.Join(tempDirectory, "source"), 0755)
+	if err != nil {
+		return err
+	}
+
+	// Setup environment for commands
+	env := os.Environ()
+	env = append(env, "HOME="+tempDirectory)
+	env = append(env, "BPM_WORKDIR="+tempDirectory)
+	env = append(env, "BPM_SOURCE="+path.Join(tempDirectory, "source"))
+	env = append(env, "BPM_OUTPUT="+path.Join(tempDirectory, "output"))
+	env = append(env, "BPM_PKG_NAME="+bpmpkg.PkgInfo.Name)
+	env = append(env, "BPM_PKG_VERSION="+bpmpkg.PkgInfo.Version)
+	env = append(env, "BPM_PKG_REVISION="+strconv.Itoa(bpmpkg.PkgInfo.Revision))
+	env = append(env, "BPM_PKG_ARCH="+GetArch())
+
+	// Execute prepare and build functions in source.sh script
+	cmd := exec.Command("bash", "-c",
+		"set -a\n"+ // Source and export functions and variables in source.sh script
+			". \"${BPM_WORKDIR}\"/source.sh\n"+
+			"set +a\n"+
+			"[[ $(type -t prepare) == \"function\" ]] && (echo \"Running prepare() function\" && cd \"$BPM_SOURCE\" && set -e && prepare)\n"+ // Run prepare() function if it exists
+			"[[ $(type -t build) == \"function\" ]] && (echo \"Running build() function\" && cd \"$BPM_SOURCE\" && set -e && build)\n"+ // Run build() function if it exists
+			"[[ $(type -t check) == \"function\" ]] && (echo \"Running check() function\" && cd \"$BPM_SOURCE\" && set -e && check)\n"+ // Run check() function if it exists
+			"exit 0")
+	cmd.Dir = tempDirectory
+	cmd.Stdout = os.Stdout
+	cmd.Stderr = os.Stderr
+	cmd.Env = env
+	err = cmd.Run()
+	if err != nil {
+		return err
+	}
+
+	// Remove 'output' directory if it already exists
+	if _, err := os.Stat(path.Join(tempDirectory, "output")); err == nil {
+		err := os.RemoveAll(path.Join(tempDirectory, "output"))
+		if err != nil {
+			return err
+		}
+	}
+
+	// Create new 'output' directory
+	err = os.Mkdir(path.Join(tempDirectory, "output"), 0755)
+	if err != nil {
+		return err
+	}
+
+	// Run bash command
+	cmd = exec.Command("bash", "-e", "-c",
+		"set -a\n"+ // Source and export functions and variables in source.sh script
+			". \"${BPM_WORKDIR}\"/source.sh\n"+
+			"set +a\n"+
+			"(echo \"Running package() function\" && cd \"$BPM_SOURCE\" && fakeroot -s \"$BPM_WORKDIR\"/fakeroot_file package)\n"+ // Run package() function
+			"fakeroot -i \"$BPM_WORKDIR\"/fakeroot_file find \"$BPM_OUTPUT\" -mindepth 1 -printf \"%P %#m %U %G %s\\n\" > \"$BPM_WORKDIR\"/pkg.files") // Create package file list
+	cmd.Dir = tempDirectory
+	cmd.Stdout = os.Stdout
+	cmd.Stderr = os.Stderr
+	cmd.Env = env
+	err = cmd.Run()
+	if err != nil {
+		return err
+	}
+
+	// Create gzip-compressed archive for the package files
+	cmd = exec.Command("bash", "-c", "find output -printf \"%P\\n\" | fakeroot -i \"$BPM_WORKDIR\"/fakeroot_file tar -czf files.tar.gz --no-recursion -C output -T -")
+	cmd.Dir = tempDirectory
+	cmd.Stdout = os.Stdout
+	cmd.Stderr = os.Stderr
+	cmd.Env = env
+	err = cmd.Run()
+	if err != nil {
+		return fmt.Errorf("files.tar.gz archive could not be created: %s", err)
+	}
+
+	// Copy pkgInfo struct and set package type to binary
+	pkgInfo := bpmpkg.PkgInfo
+	pkgInfo.Type = "binary"
+
+	// Marshal package info
+	pkgInfoBytes, err := yaml.Marshal(pkgInfo)
+	if err != nil {
+		return err
+	}
+	pkgInfoBytes = append(pkgInfoBytes, '\n')
+
+	// Create pkg.info file
+	err = os.WriteFile(path.Join(tempDirectory, "pkg.info"), pkgInfoBytes, 0644)
+	if err != nil {
+		return err
+	}
+
+	// Create final BPM archive
+	cmd = exec.Command("bash", "-c", "tar -cf "+outputFilename+" --owner=0 --group=0 -C \"$BPM_WORKDIR\" pkg.info pkg.files ${PACKAGE_SCRIPTS[@]} files.tar.gz")
+	cmd.Dir = tempDirectory
+	cmd.Stdout = os.Stdout
+	cmd.Stderr = os.Stderr
+	currentDir, err := os.Getwd()
+	if err != nil {
+		return err
+	}
+	cmd.Env = append(env, "CURRENT_DIR="+currentDir)
+	err = cmd.Run()
+	if err != nil {
+		return fmt.Errorf("BPM archive could not be created: %s", err)
+	}
+
+	return nil
+}
diff --git a/src/bpmlib/tarball.go b/src/bpmlib/tarball.go
index 84a0008..a6ef764 100644
--- a/src/bpmlib/tarball.go
+++ b/src/bpmlib/tarball.go
@@ -5,6 +5,8 @@ import (
 	"errors"
 	"io"
 	"os"
+	"path"
+	"strings"
 )
 
 type tarballFileReader struct {
@@ -41,3 +43,65 @@ func readTarballContent(tarballPath, fileToExtract string) (*tarballFileReader,
 
 	return nil, errors.New("could not file in tarball")
 }
+
+func extractTarballDirectory(tarballPath, directoryToExtract, workingDirectory string) (err error) {
+	file, err := os.Open(tarballPath)
+	if err != nil {
+		return err
+	}
+	defer file.Close()
+
+	tr := tar.NewReader(file)
+	for {
+		header, err := tr.Next()
+		if err == io.EOF {
+			break
+		}
+		if err != nil {
+			return err
+		}
+
+		if strings.HasPrefix(header.Name, directoryToExtract+"/") {
+			// Skip directory to extract
+			if strings.TrimRight(header.Name, "/") == workingDirectory {
+				continue
+			}
+
+			// Trim directory name from header name
+			header.Name = strings.TrimPrefix(header.Name, directoryToExtract+"/")
+			outputPath := path.Join(workingDirectory, header.Name)
+
+			switch header.Typeflag {
+			case tar.TypeDir:
+				// Create directory
+				err := os.MkdirAll(outputPath, 0755)
+				if err != nil {
+					return err
+				}
+			case tar.TypeReg:
+				// Create file and set permissions
+				file, err = os.Create(outputPath)
+				if err != nil {
+					return err
+				}
+				err := file.Chmod(header.FileInfo().Mode())
+				if err != nil {
+					return err
+				}
+
+				// Copy data to file
+				_, err = io.Copy(file, tr)
+				if err != nil {
+					return err
+				}
+
+				// Close file
+				file.Close()
+			default:
+				continue
+			}
+		}
+	}
+
+	return nil
+}