diff --git a/sycl/test-e2e/Compression/compression_separate_compile.cpp b/sycl/test-e2e/Compression/compression_separate_compile.cpp
index 210d0372b41e0..4c8fdd8359f50 100644
--- a/sycl/test-e2e/Compression/compression_separate_compile.cpp
+++ b/sycl/test-e2e/Compression/compression_separate_compile.cpp
@@ -1,5 +1,8 @@
 // End-to-End test for testing device image compression when we
-// seperatly compile and link device images.
+// separately compile and link device images.
+// This test validates the old offloading model.
+// The corresponding image compression test for the new offloading
+// model can be found in NewOffloadDriver/image_compression.cpp
 
 // REQUIRES: zstd, opencl-aot, cpu, linux
 
@@ -11,24 +14,24 @@
 
 // CPU AOT targets host isa, so we compile everything on the run system instead.
 //////////////////////  Compile device images
-// RUN: %{run-aux} %clangxx -fsycl -fsycl-targets=spir64_x86_64 -fsycl-host-compiler=clang++ -fsycl-host-compiler-options='-std=c++17 -Wno-attributes -Wno-deprecated-declarations -fPIC -DENABLE_KERNEL1' -DENABLE_KERNEL1 -c %s -o %t_kernel1_aot.o
-// RUN: %{run-aux} %clangxx -fsycl -fsycl-targets=spir64_x86_64 -fsycl-host-compiler=clang++ -fsycl-host-compiler-options='-std=c++17 -Wno-attributes -Wno-deprecated-declarations -fPIC -DENABLE_KERNEL2' -DENABLE_KERNEL2 -c %s -o %t_kernel2_aot.o
+// RUN: %{run-aux} %clangxx --no-offload-new-driver -fsycl -fsycl-targets=spir64_x86_64 -fsycl-host-compiler=clang++ -fsycl-host-compiler-options='-std=c++17 -Wno-attributes -Wno-deprecated-declarations -fPIC -DENABLE_KERNEL1' -DENABLE_KERNEL1 -c %s -o %t_kernel1_aot.o
+// RUN: %{run-aux} %clangxx --no-offload-new-driver -fsycl -fsycl-targets=spir64_x86_64 -fsycl-host-compiler=clang++ -fsycl-host-compiler-options='-std=c++17 -Wno-attributes -Wno-deprecated-declarations -fPIC -DENABLE_KERNEL2' -DENABLE_KERNEL2 -c %s -o %t_kernel2_aot.o
 
 //////////////////////   Link device images
-// RUN: %{run-aux} %clangxx --offload-compress -fsycl -fsycl-link -fsycl-targets=spir64_x86_64 -fPIC %t_kernel1_aot.o %t_kernel2_aot.o -o %t_compressed_image.o -v
+// RUN: %{run-aux} %clangxx --no-offload-new-driver --offload-compress -fsycl -fsycl-link -fsycl-targets=spir64_x86_64 -fPIC %t_kernel1_aot.o %t_kernel2_aot.o -o %t_compressed_image.o -v
 
 // Make sure the clang-offload-wrapper is called with the --offload-compress
-// option.
-// RUN: %{run-aux} %clangxx --offload-compress -fsycl -fsycl-link -fsycl-targets=spir64_x86_64 -fPIC %t_kernel1_aot.o %t_kernel2_aot.o -o %t_compressed_image.o -### &> %t_driver_opts.txt
+// option when using the old offloading model.
+// RUN: %{run-aux} %clangxx --no-offload-new-driver --offload-compress -fsycl -fsycl-link -fsycl-targets=spir64_x86_64 -fPIC %t_kernel1_aot.o %t_kernel2_aot.o -o %t_compressed_image.o -### &> %t_driver_opts.txt
 // RUN: %{run-aux} FileCheck -input-file=%t_driver_opts.txt %s --check-prefix=CHECK-DRIVER-OPTS
 
 // CHECK-DRIVER-OPTS: clang-offload-wrapper{{.*}} "-offload-compress"
 
 //////////////////////   Compile the host program
-// RUN: %{run-aux} %clangxx -fsycl -std=c++17 -Wno-attributes -Wno-deprecated-declarations -fPIC -c %s -o %t_main.o
+// RUN: %{run-aux} %clangxx --no-offload-new-driver -fsycl -std=c++17 -Wno-attributes -Wno-deprecated-declarations -fPIC -c %s -o %t_main.o
 
 //////////////////////   Link the host program and compressed device images
-// RUN: %{run-aux} %clangxx -fsycl %t_main.o %t_kernel1_aot.o %t_kernel2_aot.o %t_compressed_image.o -o %t_compress.out
+// RUN: %{run-aux} %clangxx --no-offload-new-driver -fsycl %t_main.o %t_kernel1_aot.o %t_kernel2_aot.o %t_compressed_image.o -o %t_compress.out
 
 // RUN: %{run} %t_compress.out
 
diff --git a/sycl/test-e2e/NewOffloadDriver/image_compression.cpp b/sycl/test-e2e/NewOffloadDriver/image_compression.cpp
new file mode 100644
index 0000000000000..f2242c6f65895
--- /dev/null
+++ b/sycl/test-e2e/NewOffloadDriver/image_compression.cpp
@@ -0,0 +1,83 @@
+// End-to-End test for testing device image compression when we
+// separately compile and link device images.
+// This test is copied from Compression/compression_separate_compile.cpp
+// and modified to test with the New Offloading Model.
+
+// REQUIRES: zstd, opencl-aot, cpu, linux
+
+// XFAIL: target-native_cpu
+// XFAIL-TRACKER: https://github.com/intel/llvm/issues/20397
+
+// CPU AOT targets host isa, so we compile everything on the run system instead.
+//////////////////////  Compile device images
+// RUN: %{run-aux} %clangxx --offload-new-driver -fsycl -fsycl-targets=spir64_x86_64 -fsycl-host-compiler=clang++ -fsycl-host-compiler-options='-std=c++17 -Wno-attributes -Wno-deprecated-declarations -fPIC -DENABLE_KERNEL1' -DENABLE_KERNEL1 -c %s -o %t_kernel1_aot.o
+// RUN: %{run-aux} %clangxx --offload-new-driver -fsycl -fsycl-targets=spir64_x86_64 -fsycl-host-compiler=clang++ -fsycl-host-compiler-options='-std=c++17 -Wno-attributes -Wno-deprecated-declarations -fPIC -DENABLE_KERNEL2' -DENABLE_KERNEL2 -c %s -o %t_kernel2_aot.o
+
+//////////////////////   Link device images
+// RUN: %{run-aux} %clangxx --offload-new-driver --offload-compress -fsycl -fsycl-link -fsycl-targets=spir64_x86_64 -fPIC %t_kernel1_aot.o %t_kernel2_aot.o -o %t_compressed_image.o -v
+
+// Make sure the clang-linker-wrapper is called with the --compress
+// option when using the new offloading model.
+// RUN: %{run-aux} %clangxx --offload-new-driver --offload-compress -fsycl -fsycl-link -fsycl-targets=spir64_x86_64 -fPIC %t_kernel1_aot.o %t_kernel2_aot.o -o %t_compressed_image.o -### &> %t_driver_opts.txt
+// RUN: %{run-aux} FileCheck -input-file=%t_driver_opts.txt %s --check-prefix=CHECK-DRIVER-OPTS
+
+// CHECK-DRIVER-OPTS: clang-linker-wrapper{{.*}} "--compress"
+
+//////////////////////   Compile the host program
+// RUN: %{run-aux} %clangxx --offload-new-driver -fsycl -std=c++17 -Wno-attributes -Wno-deprecated-declarations -fPIC -c %s -o %t_main.o
+
+//////////////////////   Link the host program and compressed device images
+// RUN: %{run-aux} %clangxx --offload-new-driver -fsycl %t_main.o %t_kernel1_aot.o %t_kernel2_aot.o %t_compressed_image.o -o %t_compress.out
+
+// RUN: %{run} %t_compress.out
+
+#include <sycl/detail/core.hpp>
+
+using namespace sycl;
+
+// Kernel 1
+#ifdef ENABLE_KERNEL1
+class test_kernel1;
+void run_kernel1(int *a, queue q) {
+  q.single_task<test_kernel1>([=]() { *a *= 3; }).wait();
+}
+#endif
+
+// Kernel 2
+#ifdef ENABLE_KERNEL2
+class test_kernel2;
+void run_kernel2(int *a, queue q) {
+  q.single_task<test_kernel2>([=]() { *a += 42; }).wait();
+}
+#endif
+
+// Main application.
+#if not defined(ENABLE_KERNEL1) && not defined(ENABLE_KERNEL2)
+#include <sycl/properties/all_properties.hpp>
+#include <sycl/usm.hpp>
+
+#include <iostream>
+
+class kernel_init;
+void run_kernel1(int *a, queue q);
+void run_kernel2(int *a, queue q);
+int main() {
+  int retCode = 0;
+  queue q;
+
+  if (!q.get_device().get_info<info::device::usm_shared_allocations>())
+    return 0;
+
+  int *p = malloc_shared<int>(1, q);
+  *p = 42;
+
+  run_kernel1(p, q);
+  run_kernel2(p, q);
+  q.wait();
+
+  retCode = *p != (42 * 3 + 42);
+
+  free(p, q);
+  return retCode;
+}
+#endif