I spent some time researching this on the Parallels forum and could not find the answer. All answers pointed to reducing usage by deleting/cleaning up files, not reducing the actual size of the drive. It turns out the reason it is not readily available is because Windows 11 encrypts the drive by default. The solution is to first decrypt the drive and then edit the VM Hard Disk settings. Detailed steps below: The solution from (https://www.reddit.com/r/mac/comments/rnnbc1/m1_macbook_pro_14_parallels_windows_11_hdd/): In the Windows 11 VM, open powershell or command prompt as admin. Use these commands to remove bitlocker encryption: Check the bitlocker encryption status: manage-bde -status Check the Conversion Status and Percent Encrypted values to verify that encryption is enabled Disable bitlocker encryption: manage-bde -off C: In my case, the C: drive had encryption enabled on the space used. Use the encryption status command above to check and verify when bitlocker encryption is down to 0%. Shutdown and create a backup of the Windows 11 VM. Note, this isn't necessary but will protect your data in case this process corrupts the VM .pvm file. Shut down the Windows 11 VM within the OS. Find the .pvm file that represents the Windows 11 VM wherever it is saved in MacOS. In my case, it was saved here: /Users/<username>/Library/Group Containers/<randomvalue>.com.parallels.desktop.appstore/Shared/Windows11.pvm Make a copy of the .pvm file and save it in a safe place if something goes wrong and you need to restore it. Open the Parallels control center. Right-click on your VM and select Configure. Under Hard Disk, select Advanced. Select Properties Resize (Reduce or Expand) the disk capacity value by either typing it in the Size field or moving the scroll bar. In my case I reduced the size to 100GB Select Apply and select Continue. It should resize the Windows 11 VM, then select Close, and then select OK. The new size should be reflected under Disk Capacity. Start up the Windows 11 VM and verify it's working.