diff --git a/pkg/blockdevice/new_block_device_from_file_windows.go b/pkg/blockdevice/new_block_device_from_file_windows.go
index 63f4432e..51b1c2ee 100644
--- a/pkg/blockdevice/new_block_device_from_file_windows.go
+++ b/pkg/blockdevice/new_block_device_from_file_windows.go
@@ -50,6 +50,15 @@ func NewBlockDeviceFromFile(path string, minimumSizeBytes int, zeroInitialize bo
 		return nil, 0, 0, util.StatusWrapf(err, "Failed to open file %#v", path)
 	}
 
+	bd, sectorSizeBytes, sectorCount, err := createBlockDevice(path, minimumSizeBytes, zeroInitialize, handle)
+	if err != nil {
+		windows.CloseHandle(handle)
+		return nil, 0, 0, err
+	}
+	return bd, sectorSizeBytes, sectorCount, nil
+}
+
+func createBlockDevice(path string, minimumSizeBytes int, zeroInitialize bool, handle windows.Handle) (BlockDevice, int, int64, error) {
 	// Get the sector size from the disk where the file is located.
 
 	// Extract the root path (drive letter) from the full path.
@@ -59,7 +68,6 @@ func NewBlockDeviceFromFile(path string, minimumSizeBytes int, zeroInitialize bo
 	}
 	rootPathPtr, err := syscall.UTF16PtrFromString(rootPath)
 	if err != nil {
-		windows.CloseHandle(handle)
 		return nil, 0, 0, util.StatusWrapf(err, "Failed to convert root path %#v to UTF-16", rootPath)
 	}
 
@@ -72,7 +80,6 @@ func NewBlockDeviceFromFile(path string, minimumSizeBytes int, zeroInitialize bo
 		/*numberOfFreeClusters=*/ 0,
 		/*totalNumberOfClusters=*/ 0)
 	if r == 0 {
-		windows.CloseHandle(handle)
 		return nil, 0, 0, util.StatusWrapf(err, "Failed to get disk sector size for %#v", rootPath)
 	}
 
@@ -82,25 +89,92 @@ func NewBlockDeviceFromFile(path string, minimumSizeBytes int, zeroInitialize bo
 	sectorCount := int64((uint64(minimumSizeBytes) + uint64(sectorSizeBytes) - 1) / uint64(sectorSizeBytes))
 	sizeBytes := int64(sectorSizeBytes) * sectorCount
 
+	// Determine if we need to make the file sparse.
+	// If we want to zero initialise the file, then we always make the
+	// file sparse as this is the most efficient way of doing so.
+	// We also mark the file as sparse if we need to resize the file.
+	// If we do not mark the file as sparse, then when this process
+	// terminates, Windows will write out the entire file's contents
+	// to disk, even if only 1 byte has been written to the file. See
+	// https://devblogs.microsoft.com/oldnewthing/20110922-00/?p=9573
+	// for further details.
+	var makeFileSparse bool
+	if zeroInitialize {
+		makeFileSparse = true
+	} else {
+		// Check if we need to resize the file.
+		var fileInfo windows.ByHandleFileInformation
+		if err := windows.GetFileInformationByHandle(handle, &fileInfo); err != nil {
+			return nil, 0, 0, util.StatusWrapf(err, "Failed to get file information for %#v", path)
+		}
+		existingSize := int64(fileInfo.FileSizeHigh)<<32 | int64(fileInfo.FileSizeLow)
+		makeFileSparse = existingSize < int64(minimumSizeBytes)
+	}
+
 	var fileSizeHigh int32 = int32(sizeBytes >> 32)
 	if _, err = windows.SetFilePointer(handle, int32(sizeBytes), (*int32)(unsafe.Pointer(&fileSizeHigh)), windows.FILE_BEGIN); err != nil {
-		windows.CloseHandle(handle)
 		return nil, 0, 0, util.StatusWrapf(err, "Failed to set file pointer for %#v", path)
 	}
 
 	if err := windows.SetEndOfFile(handle); err != nil {
-		windows.CloseHandle(handle)
 		return nil, 0, 0, util.StatusWrapf(err, "Failed to set end of file for %#v to %d bytes", path, sizeBytes)
 	}
 
+	if makeFileSparse {
+		if err := makeSparseFile(handle, sizeBytes); err != nil {
+			return nil, 0, 0, util.StatusWrapf(err, "Failed to make file sparse for %#v", path)
+		}
+	}
+
 	bd, err := newMemoryMappedBlockDevice(handle, int(sizeBytes))
 	if err != nil {
-		windows.CloseHandle(handle)
 		return nil, 0, 0, err
 	}
 	return bd, sectorSizeBytes, sectorCount, nil
 }
 
+func makeSparseFile(handle windows.Handle, sizeBytes int64) error {
+	// FILE_ZERO_DATA_INFORMATION
+	type fileZeroDataInformation struct {
+		FileOffset      int64
+		BeyondFinalZero int64
+	}
+
+	// Mark the file as sparse.
+	var bytesReturned uint32
+	if err := windows.DeviceIoControl(
+		handle,
+		windows.FSCTL_SET_SPARSE,
+		/*inBuffer=*/ nil,
+		/*inBufferSize=*/ 0,
+		/*outBuffer=*/ nil,
+		/*outBufferSize=*/ 0,
+		&bytesReturned,
+		/*overlapped=*/ nil,
+	); err != nil {
+		return util.StatusWrapf(err, "Failed to mark file as sparse")
+	}
+	// Zero the file's data.
+	zeroData := fileZeroDataInformation{
+		FileOffset:      0,
+		BeyondFinalZero: sizeBytes,
+	}
+	if err := windows.DeviceIoControl(
+		handle,
+		windows.FSCTL_SET_ZERO_DATA,
+		(*byte)(unsafe.Pointer(&zeroData)),
+		uint32(unsafe.Sizeof(zeroData)),
+		/*outBuffer=*/ nil,
+		/*outBufferSize=*/ 0,
+		&bytesReturned,
+		/*overlapped=*/ nil,
+	); err != nil {
+		return util.StatusWrapf(err, "Failed to zero sparse file data")
+	}
+
+	return nil
+}
+
 // A ScopeWalker that extracts the root path for GetDiskFreeSpaceW.
 type rootPathScopeWalker struct {
 	rootPath string