diff --git a/docs/losetup.md b/docs/losetup.md
new file mode 100644
index 000000000..ec24edce3
--- /dev/null
+++ b/docs/losetup.md
@@ -0,0 +1,27 @@
+# LinuxKit losetup
+
+Image to setup a loop device backed by a regular file in a [linuxkit](https://github.com/linuxkit/linuxkit)-generated image. The typical use case is to have a portable storage location which can be used to persist settings or other files. Can be combined with the `linuxkit/dm-crypt` package for protection.
+
+## Usage
+
+The setup is a one time step during boot:
+
+```yaml
+onboot:
+  - name: losetup
+    image: linuxkit/losetup:<hash>
+    command: ["/usr/bin/loopy", "-c", "/var/test.img"]
+```
+
+The above will associate the file `/var/test.img` with `/dev/loop0` and will also create it if it's not present.
+
+The container by default bind-mounts `/var:/var` and `/dev:/dev`. Usually the loop-file will reside on external storage which should be typically mounted under `/var` hence the choice of the defaults. If the loop-file is located somewhere else and you need a different bind-mount for it then do not forget to explicitly bind-mount `/dev:/dev` as well or else `losetup` will fail.
+
+### Options
+
+|Option|Default|Required|Notes|
+|---|---|---|---|
+|`-c` or `--create`||No|Creates the file if not present. If `--create` is not specified and the file is missing then the loop setup will obviously fail.|
+|`-s` or `--size`|10|No|If `--create` was specified and the file is not present then this sets the size in MiB of the created file. The file will be filled from `/dev/zero`.|
+|`-d` or `--dev`|`/dev/loop0`|No|Loop device which should be associated with the file.|
+|`<file>`||**Yes**|The file to use as backing storage.|
diff --git a/pkg/losetup/Dockerfile b/pkg/losetup/Dockerfile
new file mode 100644
index 000000000..99b922d20
--- /dev/null
+++ b/pkg/losetup/Dockerfile
@@ -0,0 +1,18 @@
+FROM linuxkit/alpine:3683c9a66cd4da40bd7d6c7da599b2dcd738b559 AS mirror
+RUN mkdir -p /out/etc/apk && cp -r /etc/apk/* /out/etc/apk/
+RUN apk add --no-cache --initdb -p /out  \
+    alpine-baselayout \
+    busybox
+
+# Remove apk residuals
+RUN rm -rf /out/etc/apk /out/lib/apk /out/var/cache
+
+FROM scratch
+ENTRYPOINT []
+WORKDIR /
+COPY --from=mirror /out/ /
+
+COPY loopy.sh /usr/bin/loopy
+RUN chmod +x /usr/bin/loopy
+
+CMD ["/usr/bin/loopy"]
diff --git a/pkg/losetup/build.yml b/pkg/losetup/build.yml
new file mode 100644
index 000000000..0f158a560
--- /dev/null
+++ b/pkg/losetup/build.yml
@@ -0,0 +1,7 @@
+image: losetup
+config:
+  binds:
+    - /dev:/dev
+    - /var:/var
+  capabilities:
+    - CAP_SYS_ADMIN
diff --git a/pkg/losetup/loopy.sh b/pkg/losetup/loopy.sh
new file mode 100644
index 000000000..ff872e594
--- /dev/null
+++ b/pkg/losetup/loopy.sh
@@ -0,0 +1,57 @@
+#!/bin/sh
+
+set -e
+
+help()
+{
+    echo "Usage: $0 [options] <file>"
+    echo
+    echo "Options:"
+    echo "    -c, --create          Create <file> if not present, default: false"
+    echo "    -s, --size NUM        Size of <file> in MiB if it gets created, default: 10"
+    echo "    -d, --dev DEVICE      Use DEVICE as loop device, default: /dev/loop0"
+    echo
+}
+
+create=false
+size_mib=10
+loop_device="/dev/loop0"
+
+O=`getopt -l create,size:,dev:,help -- cs:d:h "$@"` || exit 1
+eval set -- "$O"
+while true; do
+    case "$1" in
+        -c|--create)   create=true; shift;;
+        -s|--size)     size_mib=$2; shift 2;;
+        -d|--dev)      loop_device=$2; shift 2;;
+        -h|--help)     help; exit 0;;
+        --)            shift; break;;
+        *)             echo "Unknown option $1"; help; exit 1;;
+	esac
+done
+
+if [ -z "$1" ]; then
+    echo "Missing argument <file>"
+    help
+    exit 1
+fi
+
+container_file=$1
+
+if [ ! -b "$loop_device" ]; then
+    echo "Loop device $loop_device doesn't exist! Did you forget to bind-mount '/dev'?"
+    exit 2
+fi
+
+if [ ! -f "$container_file" ]; then
+    if [ $create = true ]; then
+        echo "File $container_file not found, creating new one of size $size_mib MiB"
+        dd if="/dev/zero" of="$container_file" bs=1M count=$size_mib
+    else
+        echo "File $container_file not found. Please specify --create or ensure it's present."
+        exit 2
+    fi
+fi
+
+echo "Associating file $container_file with loop device $loop_device"
+losetup "$loop_device" "$container_file"
diff --git a/test/cases/040_packages/012_losetup/check.sh b/test/cases/040_packages/012_losetup/check.sh
new file mode 100755
index 000000000..19741ecb4
--- /dev/null
+++ b/test/cases/040_packages/012_losetup/check.sh
@@ -0,0 +1,12 @@
+#!/bin/sh
+
+function failed {
+	printf "losetup test suite FAILED\n" >&1
+	exit 1
+}
+
+LOOPFILE=$(losetup /dev/loop0 2>/dev/null | cut -d' ' -f3)
+
+[ "$LOOPFILE" = "/var/test.img" ] || failed
+
+printf "losetup test suite PASSED\n" >&1
diff --git a/test/cases/040_packages/012_losetup/test.sh b/test/cases/040_packages/012_losetup/test.sh
new file mode 100644
index 000000000..5ff5860dc
--- /dev/null
+++ b/test/cases/040_packages/012_losetup/test.sh
@@ -0,0 +1,25 @@
+#!/bin/sh
+# SUMMARY: Check that the losetup package works
+# LABELS:
+# REPEAT:
+
+set -e
+
+# Source libraries. Uncomment if needed/defined
+#. "${RT_LIB}"
+. "${RT_PROJECT_ROOT}/_lib/lib.sh"
+
+NAME=losetup
+
+clean_up() {
+	rm -rf ${NAME}-*
+}
+trap clean_up EXIT
+
+# Test code goes here
+linuxkit build -format kernel+initrd -name "${NAME}" test.yml
+RESULT="$(linuxkit run $NAME)"
+echo "${RESULT}"
+echo "${RESULT}" | grep -q "suite PASSED"
+
+exit 0
diff --git a/test/cases/040_packages/012_losetup/test.yml b/test/cases/040_packages/012_losetup/test.yml
new file mode 100644
index 000000000..4cad560fe
--- /dev/null
+++ b/test/cases/040_packages/012_losetup/test.yml
@@ -0,0 +1,28 @@
+kernel:
+  image: linuxkit/kernel:4.14.88
+  cmdline: "console=ttyS0 console=ttyAMA0"
+init:
+  - linuxkit/init:c563953a2277eb73a89d89f70e4b6dcdcfebc2d1
+  - linuxkit/runc:83d0edb4552b1a5df1f0976f05f442829eac38fe
+onboot:
+  - name: losetup
+    image: linuxkit/losetup:aaceeea49ac519bc3b87da239436dd997d67b431
+    command: ["/usr/bin/loopy", "-c", "/var/test.img"]
+  - name: test
+    image: alpine:3.8
+    net: host
+    binds:
+      - /check.sh:/check.sh
+      - /dev:/dev
+    command: ["sh", "./check.sh"]
+  - name: poweroff
+    image: linuxkit/poweroff:afe8f7dd0d47a7991c54519b0f09124cb8c4e300
+    command: ["/bin/sh", "/poweroff.sh", "10"]
+files:
+  - path: check.sh
+    source: ./check.sh
+trust:
+  org:
+    - linuxkit
+  image:
+    - alpine:3.8