A host computer has a virtualization software that supports execution of a plurality of virtual machines, where the virtualization software includes a virtual machine monitor for each of the virtual machines, and where each virtual machine monitor emulates a virtual central processing unit (CPU) for a corresponding virtual machine. A virtual machine monitor halts execution of a virtual CPU of a virtual machine by receiving a first halt instruction from a corresponding virtual machine and determining whether the virtual machine is latency sensitive. If the virtual machine is latency sensitive, then a second halt instruction is issued from the virtual machine monitor to halt a physical CPU on which the virtual CPU executes. If the virtual machine is not latency sensitive, then a system call to a kernel executing on the host computer is executed to indicate to the kernel that the virtual CPU is in an idle state.