diff --git a/call_test.go b/call_test.go
index 2bcea807..38ffc31d 100644
--- a/call_test.go
+++ b/call_test.go
@@ -105,12 +105,13 @@ func (h *testStreamHandler) handleStream(t *testing.T, s *transport.Stream) {
 		}
 	}
 	// send a response back to end the stream.
-	hdr, data, err := encode(testCodec{}, &expectedResponse, nil, nil, nil)
+	data, err := encode(testCodec{}, &expectedResponse)
 	if err != nil {
 		t.Errorf("Failed to encode the response: %v", err)
 		return
 	}
-	h.t.Write(s, hdr, data, &transport.Options{})
+	hdr, payload := msgHeader(data, nil)
+	h.t.Write(s, hdr, payload, &transport.Options{})
 	h.t.WriteStatus(s, status.New(codes.OK, ""))
 }
 
diff --git a/rpc_util.go b/rpc_util.go
index c783ee50..6b1e8cfd 100644
--- a/rpc_util.go
+++ b/rpc_util.go
@@ -419,8 +419,8 @@ func (o CustomCodecCallOption) after(c *callInfo) {}
 type payloadFormat uint8
 
 const (
-	compressionNone payloadFormat = iota // no compression
-	compressionMade
+	compressionNone payloadFormat = 0 // no compression
+	compressionMade payloadFormat = 1 // compressed
 )
 
 // parser reads complete gRPC messages from the underlying reader.
@@ -477,65 +477,82 @@ func (p *parser) recvMsg(maxReceiveMessageSize int) (pf payloadFormat, msg []byt
 	return pf, msg, nil
 }
 
-// encode serializes msg and returns a buffer of message header and a buffer of msg.
-// If msg is nil, it generates the message header and an empty msg buffer.
-// TODO(ddyihai): eliminate extra Compressor parameter.
-func encode(c baseCodec, msg interface{}, cp Compressor, outPayload *stats.OutPayload, compressor encoding.Compressor) ([]byte, []byte, error) {
-	var (
-		b    []byte
-		cbuf *bytes.Buffer
-	)
-	const (
-		payloadLen = 1
-		sizeLen    = 4
-	)
-	if msg != nil {
-		var err error
-		b, err = c.Marshal(msg)
-		if err != nil {
-			return nil, nil, status.Errorf(codes.Internal, "grpc: error while marshaling: %v", err.Error())
-		}
-		if outPayload != nil {
-			outPayload.Payload = msg
-			// TODO truncate large payload.
-			outPayload.Data = b
-			outPayload.Length = len(b)
-		}
-		if compressor != nil || cp != nil {
-			cbuf = new(bytes.Buffer)
-			// Has compressor, check Compressor is set by UseCompressor first.
-			if compressor != nil {
-				z, _ := compressor.Compress(cbuf)
-				if _, err := z.Write(b); err != nil {
-					return nil, nil, status.Errorf(codes.Internal, "grpc: error while compressing: %v", err.Error())
-				}
-				z.Close()
-			} else {
-				// If Compressor is not set by UseCompressor, use default Compressor
-				if err := cp.Do(cbuf, b); err != nil {
-					return nil, nil, status.Errorf(codes.Internal, "grpc: error while compressing: %v", err.Error())
-				}
-			}
-			b = cbuf.Bytes()
-		}
+// encode serializes msg and returns a buffer containing the message, or an
+// error if it is too large to be transmitted by grpc.  If msg is nil, it
+// generates an empty message.
+func encode(c baseCodec, msg interface{}) ([]byte, error) {
+	if msg == nil { // NOTE: typed nils will not be caught by this check
+		return nil, nil
+	}
+	b, err := c.Marshal(msg)
+	if err != nil {
+		return nil, status.Errorf(codes.Internal, "grpc: error while marshaling: %v", err.Error())
 	}
 	if uint(len(b)) > math.MaxUint32 {
-		return nil, nil, status.Errorf(codes.ResourceExhausted, "grpc: message too large (%d bytes)", len(b))
+		return nil, status.Errorf(codes.ResourceExhausted, "grpc: message too large (%d bytes)", len(b))
 	}
+	return b, nil
+}
 
-	bufHeader := make([]byte, payloadLen+sizeLen)
-	if compressor != nil || cp != nil {
-		bufHeader[0] = byte(compressionMade)
+// compress returns the input bytes compressed by compressor or cp.  If both
+// compressors are nil, returns nil.
+//
+// TODO(dfawley): eliminate cp parameter by wrapping Compressor in an encoding.Compressor.
+func compress(in []byte, cp Compressor, compressor encoding.Compressor) ([]byte, error) {
+	if compressor == nil && cp == nil {
+		return nil, nil
+	}
+	wrapErr := func(err error) error {
+		return status.Errorf(codes.Internal, "grpc: error while compressing: %v", err.Error())
+	}
+	cbuf := &bytes.Buffer{}
+	if compressor != nil {
+		z, _ := compressor.Compress(cbuf)
+		if _, err := z.Write(in); err != nil {
+			return nil, wrapErr(err)
+		}
+		if err := z.Close(); err != nil {
+			return nil, wrapErr(err)
+		}
 	} else {
-		bufHeader[0] = byte(compressionNone)
+		if err := cp.Do(cbuf, in); err != nil {
+			return nil, wrapErr(err)
+		}
+	}
+	return cbuf.Bytes(), nil
+}
+
+const (
+	payloadLen = 1
+	sizeLen    = 4
+	headerLen  = payloadLen + sizeLen
+)
+
+// msgHeader returns a 5-byte header for the message being transmitted and the
+// payload, which is compData if non-nil or data otherwise.
+func msgHeader(data, compData []byte) (hdr []byte, payload []byte) {
+	hdr = make([]byte, headerLen)
+	if compData != nil {
+		hdr[0] = byte(compressionMade)
+		data = compData
+	} else {
+		hdr[0] = byte(compressionNone)
 	}
 
-	// Write length of b into buf
-	binary.BigEndian.PutUint32(bufHeader[payloadLen:], uint32(len(b)))
-	if outPayload != nil {
-		outPayload.WireLength = payloadLen + sizeLen + len(b)
+	// Write length of payload into buf
+	binary.BigEndian.PutUint32(hdr[payloadLen:], uint32(len(data)))
+	return hdr, data
+}
+
+func outPayload(client bool, msg interface{}, data, payload []byte, t time.Time) *stats.OutPayload {
+	return &stats.OutPayload{
+		Client:     client,
+		Payload:    msg,
+		Data:       data,
+		Length:     len(data),
+		WireLength: len(payload) + headerLen,
+		SentTime:   t,
 	}
-	return bufHeader, b, nil
 }
 
 func checkRecvPayload(pf payloadFormat, recvCompress string, haveCompressor bool) *status.Status {
diff --git a/rpc_util_test.go b/rpc_util_test.go
index 770e850c..f28cff23 100644
--- a/rpc_util_test.go
+++ b/rpc_util_test.go
@@ -105,23 +105,25 @@ func TestEncode(t *testing.T) {
 	for _, test := range []struct {
 		// input
 		msg proto.Message
-		cp  Compressor
 		// outputs
 		hdr  []byte
 		data []byte
 		err  error
 	}{
-		{nil, nil, []byte{0, 0, 0, 0, 0}, []byte{}, nil},
+		{nil, []byte{0, 0, 0, 0, 0}, []byte{}, nil},
 	} {
-		hdr, data, err := encode(encoding.GetCodec(protoenc.Name), test.msg, nil, nil, nil)
-		if err != test.err || !bytes.Equal(hdr, test.hdr) || !bytes.Equal(data, test.data) {
-			t.Fatalf("encode(_, _, %v, _) = %v, %v, %v\nwant %v, %v, %v", test.cp, hdr, data, err, test.hdr, test.data, test.err)
+		data, err := encode(encoding.GetCodec(protoenc.Name), test.msg)
+		if err != test.err || !bytes.Equal(data, test.data) {
+			t.Errorf("encode(_, %v) = %v, %v; want %v, %v", test.msg, data, err, test.data, test.err)
+			continue
+		}
+		if hdr, _ := msgHeader(data, nil); !bytes.Equal(hdr, test.hdr) {
+			t.Errorf("msgHeader(%v, false) = %v; want %v", data, hdr, test.hdr)
 		}
 	}
 }
 
 func TestCompress(t *testing.T) {
-
 	bestCompressor, err := NewGZIPCompressorWithLevel(gzip.BestCompression)
 	if err != nil {
 		t.Fatalf("Could not initialize gzip compressor with best compression.")
@@ -214,12 +216,12 @@ func TestParseDialTarget(t *testing.T) {
 func bmEncode(b *testing.B, mSize int) {
 	cdc := encoding.GetCodec(protoenc.Name)
 	msg := &perfpb.Buffer{Body: make([]byte, mSize)}
-	encodeHdr, encodeData, _ := encode(cdc, msg, nil, nil, nil)
-	encodedSz := int64(len(encodeHdr) + len(encodeData))
+	encodeData, _ := encode(cdc, msg)
+	encodedSz := int64(len(encodeData))
 	b.ReportAllocs()
 	b.ResetTimer()
 	for i := 0; i < b.N; i++ {
-		encode(cdc, msg, nil, nil, nil)
+		encode(cdc, msg)
 	}
 	b.SetBytes(encodedSz)
 }
diff --git a/server.go b/server.go
index 4969331c..c76bb535 100644
--- a/server.go
+++ b/server.go
@@ -827,24 +827,24 @@ func (s *Server) incrCallsFailed() {
 }
 
 func (s *Server) sendResponse(t transport.ServerTransport, stream *transport.Stream, msg interface{}, cp Compressor, opts *transport.Options, comp encoding.Compressor) error {
-	var (
-		outPayload *stats.OutPayload
-	)
-	if s.opts.statsHandler != nil {
-		outPayload = &stats.OutPayload{}
-	}
-	hdr, data, err := encode(s.getCodec(stream.ContentSubtype()), msg, cp, outPayload, comp)
+	data, err := encode(s.getCodec(stream.ContentSubtype()), msg)
 	if err != nil {
 		grpclog.Errorln("grpc: server failed to encode response: ", err)
 		return err
 	}
-	if len(data) > s.opts.maxSendMessageSize {
-		return status.Errorf(codes.ResourceExhausted, "grpc: trying to send message larger than max (%d vs. %d)", len(data), s.opts.maxSendMessageSize)
+	compData, err := compress(data, cp, comp)
+	if err != nil {
+		grpclog.Errorln("grpc: server failed to compress response: ", err)
+		return err
 	}
-	err = t.Write(stream, hdr, data, opts)
-	if err == nil && outPayload != nil {
-		outPayload.SentTime = time.Now()
-		s.opts.statsHandler.HandleRPC(stream.Context(), outPayload)
+	hdr, payload := msgHeader(data, compData)
+	// TODO(dfawley): should we be checking len(data) instead?
+	if len(payload) > s.opts.maxSendMessageSize {
+		return status.Errorf(codes.ResourceExhausted, "grpc: trying to send message larger than max (%d vs. %d)", len(payload), s.opts.maxSendMessageSize)
+	}
+	err = t.Write(stream, hdr, payload, opts)
+	if err == nil && s.opts.statsHandler != nil {
+		s.opts.statsHandler.HandleRPC(stream.Context(), outPayload(false, msg, data, payload, time.Now()))
 	}
 	return err
 }
diff --git a/stream.go b/stream.go
index 11d8f67c..bb8c75a8 100644
--- a/stream.go
+++ b/stream.go
@@ -476,27 +476,27 @@ func (a *csAttempt) sendMsg(m interface{}) (err error) {
 		}
 		a.mu.Unlock()
 	}
-	var outPayload *stats.OutPayload
-	if a.statsHandler != nil {
-		outPayload = &stats.OutPayload{
-			Client: true,
-		}
-	}
-	hdr, data, err := encode(cs.codec, m, cs.cp, outPayload, cs.comp)
+	data, err := encode(cs.codec, m)
 	if err != nil {
 		return err
 	}
-	if len(data) > *cs.c.maxSendMessageSize {
-		return status.Errorf(codes.ResourceExhausted, "trying to send message larger than max (%d vs. %d)", len(data), *cs.c.maxSendMessageSize)
+	compData, err := compress(data, cs.cp, cs.comp)
+	if err != nil {
+		return err
 	}
+	hdr, payload := msgHeader(data, compData)
+	// TODO(dfawley): should we be checking len(data) instead?
+	if len(payload) > *cs.c.maxSendMessageSize {
+		return status.Errorf(codes.ResourceExhausted, "trying to send message larger than max (%d vs. %d)", len(payload), *cs.c.maxSendMessageSize)
+	}
+
 	if !cs.desc.ClientStreams {
 		cs.sentLast = true
 	}
-	err = a.t.Write(a.s, hdr, data, &transport.Options{Last: !cs.desc.ClientStreams})
+	err = a.t.Write(a.s, hdr, payload, &transport.Options{Last: !cs.desc.ClientStreams})
 	if err == nil {
-		if outPayload != nil {
-			outPayload.SentTime = time.Now()
-			a.statsHandler.HandleRPC(a.ctx, outPayload)
+		if a.statsHandler != nil {
+			a.statsHandler.HandleRPC(a.ctx, outPayload(true, m, data, payload, time.Now()))
 		}
 		if channelz.IsOn() {
 			a.t.IncrMsgSent()
@@ -706,23 +706,24 @@ func (ss *serverStream) SendMsg(m interface{}) (err error) {
 			ss.t.IncrMsgSent()
 		}
 	}()
-	var outPayload *stats.OutPayload
-	if ss.statsHandler != nil {
-		outPayload = &stats.OutPayload{}
-	}
-	hdr, data, err := encode(ss.codec, m, ss.cp, outPayload, ss.comp)
+	data, err := encode(ss.codec, m)
 	if err != nil {
 		return err
 	}
-	if len(data) > ss.maxSendMessageSize {
-		return status.Errorf(codes.ResourceExhausted, "trying to send message larger than max (%d vs. %d)", len(data), ss.maxSendMessageSize)
+	compData, err := compress(data, ss.cp, ss.comp)
+	if err != nil {
+		return err
 	}
-	if err := ss.t.Write(ss.s, hdr, data, &transport.Options{Last: false}); err != nil {
+	hdr, payload := msgHeader(data, compData)
+	// TODO(dfawley): should we be checking len(data) instead?
+	if len(payload) > ss.maxSendMessageSize {
+		return status.Errorf(codes.ResourceExhausted, "trying to send message larger than max (%d vs. %d)", len(payload), ss.maxSendMessageSize)
+	}
+	if err := ss.t.Write(ss.s, hdr, payload, &transport.Options{Last: false}); err != nil {
 		return toRPCErr(err)
 	}
-	if outPayload != nil {
-		outPayload.SentTime = time.Now()
-		ss.statsHandler.HandleRPC(ss.s.Context(), outPayload)
+	if ss.statsHandler != nil {
+		ss.statsHandler.HandleRPC(ss.s.Context(), outPayload(false, m, data, payload, time.Now()))
 	}
 	return nil
 }