diff --git a/lib/vagrant/actions/box/add.rb b/lib/vagrant/actions/box/add.rb
index b46ba2c3d..98a119b81 100644
--- a/lib/vagrant/actions/box/add.rb
+++ b/lib/vagrant/actions/box/add.rb
@@ -4,6 +4,7 @@ module Vagrant
       class Add < Base
         def prepare
           @runner.add_action(Download)
+          @runner.add_action(Unpackage)
         end
       end
     end
diff --git a/lib/vagrant/actions/box/download.rb b/lib/vagrant/actions/box/download.rb
index 4d394e00a..ed1bfc204 100644
--- a/lib/vagrant/actions/box/download.rb
+++ b/lib/vagrant/actions/box/download.rb
@@ -10,6 +10,7 @@ module Vagrant
         def execute!
           with_tempfile do |tempfile|
             copy_uri_to(tempfile)
+            @runner.temp_path = tempfile.path
           end
         end
 
@@ -20,6 +21,8 @@ module Vagrant
           end
         end
 
+        # TODO: Need a way to report progress. Downloading/copying a 350 MB
+        # box without any progress is not acceptable.
         def copy_uri_to(f)
           logger.info "Copying box to temporary location..."
           open(@runner.uri) do |remote_file|
diff --git a/lib/vagrant/actions/box/unpackage.rb b/lib/vagrant/actions/box/unpackage.rb
new file mode 100644
index 000000000..5b8542695
--- /dev/null
+++ b/lib/vagrant/actions/box/unpackage.rb
@@ -0,0 +1,38 @@
+module Vagrant
+  module Actions
+    module Box
+      class Unpackage < Base
+        TAR_OPTIONS = [File::RDONLY, 0644, Tar::GNU]
+
+        def execute!
+          setup_box_dir
+          decompress
+        end
+
+        def setup_box_dir
+          if File.directory?(box_dir)
+            error_and_exit(<<-msg)
+This box appears to already exist! Please call `vagrant box remove #{@runner.name}`
+and then try to add it again.
+msg
+          end
+
+          FileUtils.mkdir_p(box_dir)
+        end
+
+        def box_dir
+          File.join(Env.boxes_path, @runner.name)
+        end
+
+        def decompress
+          Dir.chdir(box_dir) do
+            logger.info "Extracting box to #{box_dir}..."
+            Tar.open(@runner.temp_path, *TAR_OPTIONS) do |tar|
+              tar.extract_all
+            end
+          end
+        end
+      end
+    end
+  end
+end
\ No newline at end of file
diff --git a/lib/vagrant/env.rb b/lib/vagrant/env.rb
index 5c55c6e19..3972eb1c5 100644
--- a/lib/vagrant/env.rb
+++ b/lib/vagrant/env.rb
@@ -15,6 +15,7 @@ module Vagrant
       def dotfile_path; File.join(root_path, Vagrant.config.dotfile_name); end
       def home_path; File.expand_path(Vagrant.config.vagrant.home); end
       def tmp_path; File.join(home_path, "tmp"); end
+      def boxes_path; File.join(home_path, "boxes"); end
 
       def load!
         load_root_path!
diff --git a/test/vagrant/actions/box/add_test.rb b/test/vagrant/actions/box/add_test.rb
index 36c0e4821..0eef239e1 100644
--- a/test/vagrant/actions/box/add_test.rb
+++ b/test/vagrant/actions/box/add_test.rb
@@ -2,9 +2,25 @@ require File.join(File.dirname(__FILE__), '..', '..', '..', 'test_helper')
 
 class AddBoxActionTest < Test::Unit::TestCase
   setup do
-    @wrapper_vm, @vm, @action = mock_action(Vagrant::Actions::Box::Add)
+    @runner, @vm, @action = mock_action(Vagrant::Actions::Box::Add)
     mock_config
   end
 
-  # TODO: Everything, once add does anything.
+  context "sub-actions" do
+    setup do
+      @default_order = [Vagrant::Actions::Box::Download, Vagrant::Actions::Box::Unpackage]
+    end
+
+    def setup_action_expectations
+      default_seq = sequence("default_seq")
+      @default_order.each do |action|
+        @runner.expects(:add_action).with(action).once.in_sequence(default_seq)
+      end
+    end
+
+    should "do the proper actions by default" do
+      setup_action_expectations
+      @action.prepare
+    end
+  end
 end
diff --git a/test/vagrant/actions/box/download_test.rb b/test/vagrant/actions/box/download_test.rb
index 81faa1f28..6af5b00ca 100644
--- a/test/vagrant/actions/box/download_test.rb
+++ b/test/vagrant/actions/box/download_test.rb
@@ -5,6 +5,7 @@ class DownloadBoxActionTest < Test::Unit::TestCase
     @uri = "foo.com"
     @runner, @vm, @action = mock_action(Vagrant::Actions::Box::Download)
     @runner.stubs(:uri).returns(@uri)
+    @runner.stubs(:temp_path=)
     mock_config
 
     Vagrant::Env.stubs(:tmp_path).returns("foo")
@@ -12,7 +13,13 @@ class DownloadBoxActionTest < Test::Unit::TestCase
 
   context "executing" do
     setup do
+      @path = "foo"
+
       @tempfile = mock("tempfile")
+      @tempfile.stubs(:path).returns(@path)
+
+      @action.stubs(:with_tempfile).yields(@tempfile)
+      @action.stubs(:copy_uri_to)
     end
 
     should "make a tempfile and copy the URI contents to it" do
@@ -20,6 +27,11 @@ class DownloadBoxActionTest < Test::Unit::TestCase
       @action.expects(:copy_uri_to).with(@tempfile)
       @action.execute!
     end
+
+    should "save the tempfile path" do
+      @runner.expects(:temp_path=).with(@path).once
+      @action.execute!
+    end
   end
 
   context "tempfile" do
diff --git a/test/vagrant/actions/box/unpackage_test.rb b/test/vagrant/actions/box/unpackage_test.rb
new file mode 100644
index 000000000..37860688f
--- /dev/null
+++ b/test/vagrant/actions/box/unpackage_test.rb
@@ -0,0 +1,73 @@
+require File.join(File.dirname(__FILE__), '..', '..', '..', 'test_helper')
+
+class UnpackageBoxActionTest < Test::Unit::TestCase
+  setup do
+    @runner, @vm, @action = mock_action(Vagrant::Actions::Box::Unpackage)
+    @runner.stubs(:name).returns("foo")
+    @runner.stubs(:temp_path).returns("bar")
+    mock_config
+
+    Vagrant::Env.stubs(:boxes_path).returns("bar")
+  end
+
+  context "executing" do
+    should "execute the proper actions in the proper order" do
+      exec_seq = sequence("exec_seq")
+      @action.expects(:setup_box_dir).in_sequence(exec_seq)
+      @action.expects(:decompress).in_sequence(exec_seq)
+      @action.execute!
+    end
+  end
+
+  context "box directory" do
+    setup do
+      @box_dir = File.join(Vagrant::Env.boxes_path, @runner.name)
+    end
+
+    should "return the boxes_path joined with the name" do
+      assert_equal @box_dir, @action.box_dir
+    end
+  end
+
+  context "setting up the box directory" do
+    setup do
+      File.stubs(:directory?).returns(false)
+      FileUtils.stubs(:mkdir_p)
+
+      @box_dir = "foo"
+      @action.stubs(:box_dir).returns(@box_dir)
+    end
+
+    should "error and exit if the directory exists" do
+      File.expects(:directory?).returns(true)
+      @action.expects(:error_and_exit).once
+      @action.setup_box_dir
+    end
+
+    should "create the directory" do
+      FileUtils.expects(:mkdir_p).with(@box_dir).once
+      @action.setup_box_dir
+    end
+  end
+
+  context "decompressing" do
+    setup do
+      @box_dir = "foo"
+
+      @action.stubs(:box_dir).returns(@box_dir)
+      Dir.stubs(:chdir).yields
+    end
+
+    should "change to the box directory" do
+      Dir.expects(:chdir).with(@box_dir)
+      @action.decompress
+    end
+
+    should "open the tar file within the new directory, and extract it all" do
+      @tar = mock("tar")
+      @tar.expects(:extract_all).once
+      Tar.expects(:open).with(@runner.temp_path, anything, anything, anything).yields(@tar)
+      @action.decompress
+    end
+  end
+end
diff --git a/test/vagrant/env_test.rb b/test/vagrant/env_test.rb
index 0bac91fa4..dc98a77ab 100644
--- a/test/vagrant/env_test.rb
+++ b/test/vagrant/env_test.rb
@@ -191,5 +191,11 @@ class EnvTest < Test::Unit::TestCase
       Vagrant::Env.stubs(:home_path).returns(@home_path)
       assert_equal File.join(@home_path, "tmp"), Vagrant::Env.tmp_path
     end
+
+    should "return the boxes path" do
+      @home_path = "foo"
+      Vagrant::Env.stubs(:home_path).returns(@home_path)
+      assert_equal File.join(@home_path, "boxes"), Vagrant::Env.boxes_path
+    end
   end
 end