A first virtualization control mode to be used for configuring one or more compute instances is determined. Based at least partly on the mode, preparatory configuration operations for launching a compute instance are initiated. The operations include transferring at least a portion of a machine image to a storage device accessible from a host, and initialization of a virtual network interface. A compute instance is instantiated using the machine image at the host. The compute instance is a thread of an intermediary process launched by an administrative agent at the host in response to a launch request.