diff --git a/airflow/models/dagbag.py b/airflow/models/dagbag.py
index 4bfe177e8cc1d..697d1c50fde97 100644
--- a/airflow/models/dagbag.py
+++ b/airflow/models/dagbag.py
@@ -39,7 +39,7 @@
 from airflow.executors import get_default_executor
 from airflow.stats import Stats
 from airflow.utils import timezone
-from airflow.utils.dag_processing import list_py_file_paths
+from airflow.utils.dag_processing import list_py_file_paths, correct_maybe_zipped
 from airflow.utils.db import provide_session
 from airflow.utils.helpers import pprinttable
 from airflow.utils.log.logging_mixin import LoggingMixin
@@ -364,6 +364,8 @@ def collect_dags(
         FileLoadStat = namedtuple(
             'FileLoadStat', "file duration dag_num task_num dags")
 
+        dag_folder = correct_maybe_zipped(dag_folder)
+
         for filepath in list_py_file_paths(dag_folder, safe_mode=safe_mode,
                                            include_examples=include_examples):
             try:
diff --git a/airflow/utils/dag_processing.py b/airflow/utils/dag_processing.py
index f0adae27b4b24..37036ba9410d3 100644
--- a/airflow/utils/dag_processing.py
+++ b/airflow/utils/dag_processing.py
@@ -277,6 +277,20 @@ def get_dag(self, dag_id):
         return self.dag_id_to_simple_dag[dag_id]
 
 
+def correct_maybe_zipped(fileloc):
+    """
+    If the path contains a folder with a .zip suffix, then
+    the folder is treated as a zip archive and path to zip is returned.
+    """
+
+    _, archive, filename = re.search(
+        r'((.*\.zip){})?(.*)'.format(re.escape(os.sep)), fileloc).groups()
+    if archive and zipfile.is_zipfile(archive):
+        return archive
+    else:
+        return fileloc
+
+
 def list_py_file_paths(directory, safe_mode=True,
                        include_examples=None):
     """
diff --git a/tests/utils/test_dag_processing.py b/tests/utils/test_dag_processing.py
index ad33b7f64372d..611aaac30d33a 100644
--- a/tests/utils/test_dag_processing.py
+++ b/tests/utils/test_dag_processing.py
@@ -21,6 +21,7 @@
 import sys
 import tempfile
 import unittest
+import mock
 from datetime import timedelta
 
 from mock import MagicMock
@@ -32,7 +33,7 @@
 from airflow.models import DagBag, TaskInstance as TI
 from airflow.utils import timezone
 from airflow.utils.dag_processing import (DagFileProcessorAgent, DagFileProcessorManager,
-                                          SimpleTaskInstance)
+                                          SimpleTaskInstance, correct_maybe_zipped)
 from airflow.utils.db import create_session
 from airflow.utils.state import State
 
@@ -326,3 +327,36 @@ def processor_factory(file_path, zombies):
         manager_process.join()
 
         self.assertTrue(os.path.isfile(log_file_loc))
+
+
+class TestCorrectMaybeZipped(unittest.TestCase):
+    @mock.patch("zipfile.is_zipfile")
+    def test_correct_maybe_zipped_normal_file(self, mocked_is_zipfile):
+        path = '/path/to/some/file.txt'
+        mocked_is_zipfile.return_value = False
+
+        dag_folder = correct_maybe_zipped(path)
+
+        self.assertEqual(dag_folder, path)
+
+    @mock.patch("zipfile.is_zipfile")
+    def test_correct_maybe_zipped_normal_file_with_zip_in_name(self, mocked_is_zipfile):
+        path = '/path/to/fakearchive.zip.other/file.txt'
+        mocked_is_zipfile.return_value = False
+
+        dag_folder = correct_maybe_zipped(path)
+
+        self.assertEqual(dag_folder, path)
+
+    @mock.patch("zipfile.is_zipfile")
+    def test_correct_maybe_zipped_archive(self, mocked_is_zipfile):
+        path = '/path/to/archive.zip/deep/path/to/file.txt'
+        mocked_is_zipfile.return_value = True
+
+        dag_folder = correct_maybe_zipped(path)
+
+        assert mocked_is_zipfile.call_count == 1
+        (args, kwargs) = mocked_is_zipfile.call_args_list[0]
+        self.assertEqual('/path/to/archive.zip', args[0])
+
+        self.assertEqual(dag_folder, '/path/to/archive.zip')