Chunked transfer encoding allows a server to maintain an HTTP persistent connection for dynamically generated content. In this case the HTTP Content-Length header cannot be used to delimit the content and the next HTTP request/response, as the content size is as yet unknown. Chunked encoding has the benefit that it is not necessary to generate the full content before writing the header, as it allows streaming of content as chunks and explicitly signaling the end of the content, making the connection available for the next HTTP request/response.

Chunked encoding allows the sender to send additional header fields after the message body. This is important in cases where values of a field cannot be known until the content has been produced such as when the content of the message must be digitally signed. Without chunked encoding, the sender would have to buffer the content until it was complete in order to calculate a field value and send it before the content.

HTTP servers sometimes use compression (gzip) or deflate methods to optimize transmission. How both chunked and gzip encoding interact is dictated by the two-staged encoding of HTTP: first the content stream is encoded as (Content-Encoding: gzip), after which the resulting byte stream is encoded for transfer using another encoder (Transfer-Encoding: chunked). This means that in case both compression and chunked encoding are enabled, the chunk encoding itself is not compressed, and the data in each chunk should not be compressed individually. The remote endpoint can decode the incoming stream by first decoding it with the Transfer-Encoding, followed by the specified Content-Encoding.