How to create encrypted virtual hard disk in Windows 10

Virtual Hard Disk (VHD) is a file that can be mounted in the system and work as a logical disk, all its data can be encrypted. Operating system Windows 10 provides tools to create and manage VHD. The VHD file can be copied to another system, USB flash drive or to a cloud (Google Drive, Onedrive, etc.). Let's see how it works.

How to Create a Virtual Hard Disk in Windows 10

First, start the Disk Management program - open the Run dialog box (hit WIN+R on the keyboard), then type diskmgmt.msc in it.

Run dialog box

click on Action --> Create VHD In the system menu of Disk Management:

Disk Management main window

You'll see this panel - Create and Attach Virtual Hard Disk:

Create and Attach Virtual Hard Disk panel

Select the location (1) for the Virtual Hard Disk, in this example it is located in "C:\disk.vhdx". The format of the disk is VHDX (2), it is more reliable than VHD. The disk is Dynamically Expanded (3), it means that the disk size will expand until it reaches the limit (4).

Warning! Virtual Hard Disk can only be created and used on NTFS partitions. If you try to create it on FAT32 partition, you'll get this message:

The requested operation could not be completed due to a file system limitation

Error at the attempt to create Virtual Hard Disk on FAT32 partition

FAT32 and other type of partitions can be use only to store VHDX files.

Unallocated disk space in newly created Virtual Hard Disk

Now exit the Disk Management, then start it again. You'll see a panel that allows to create a Master Boot Record for the Virtual Hard Disk:

Initialize Disk window

Next, click with Right Mouse Button on Unallocated Space and select New simple Volume form the context menu:

New simple Volume

You'll see New simple Volume Wizard, follow its instructions:

New simple Volume Wizard

New simple Volume Wizard - Specify volume size

Assign any available letter to the Virtual Hard Disk:

Assigning a letter to the Virtual Hard Disk

Format it:

New simple Volume Wizard - Format partition

Completing the New Simple Volume Wizard

At the end, the disk can be seen in the Disk Management:

New Volume is Healthy in Disk Management

Open File Explorer (hit WIN+E on the keyboard), you'll see the Virtual Hard Disk is mounted as a logical disk:

Disks in File Explorer

To disconnect the Virtual Hard Disk from the system, click with Right Mouse Button on the disk, then select the command "Eject" form the context menu:

Disconnect the Virtual Hard Disk from the system

To mount Virtual Hard Disk, click with Right Mouse Button on the VHDX file (in this example it is "C:\disk.vhdx"):

How To mount the Virtual Hard Disk in the system

How to Encrypt the Virtual Hard Disk using BitLocker

Mount the disk as it was described above. Click with Right Mouse Button on the disk, select Turn On BitLocker

Popup menu item with Turn On BitLocker

Enter a password. Use a strong password that contains lowercase and uppercase letters, digits, symbols and spaces:

Choose how you want to unlock this drive

Save the BitLocker Recovery Key to a file:

Saving the BitLocker Recovery Key to a file

Choose which encryption mode to use

Ready to Encrypt Virtual Hard Disk

Now the disk is encrypted. If you mount it and click on the disk, you'll be asked for password.

Encrypted local disk in File Explorer

Enter a password to Encrypt Virtual Hard Disk

If you forgot the password, then you can use BitLocker Recovery Key to unlock the VHDX file so keep the recovery key safe (the signature Recovery Key in the file saved earlier):

Recovery Key:
        223656-437586-548768-293192-023794-173624-216755-193048

Click on More Options --> Enter Recovery Key:

Using BitLocker Recovery Key to unlock the Virtual Hard Disk

Then enter the Recovery Key:

Enter the Recovery Key

And now you can open the Virtual Hard Disk and work with it as with a normal disk, all the data are encrypted. Dismount the disk, and you can move the it (the file "C:\disk.vhdx") to any other computer with Windows 10.

How to open Virtual Hard Disk on another system

Copy file "disk.vhdx" to a new system, then try to mount it. You'll see this error:

Attempt to open Virtual Hard Disk on another system

Open Control Panel (WIN+R on the keyboard, then type control.exe) System and Security --> BitLocker Drive Encryption and unlock the file (find a corresponding logical drive in the BitLocker Drive Encryption panel ):

BitLocker Drive Encryption in Control Panel

Click on "Unlock Drive", then enter the password. That's all, the Virtual Hard Disk is ready. Now it can be used as a normal logical disk.

You can also watch this Youtube video: How to create encrypted virtual hard disk in windows 10

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