A method for file system reorganization in the presence of inline compression includes obtaining a virtual block pointer for an original compressed segment to be reorganized, the original compressed segment comprising compressed allocation units of data stored in a storage system, wherein the virtual block pointer comprises an extent list identifying the compressed allocation units in the original compressed segment and a pointer to where the original compressed segment is stored; copying only the referenced compressed allocation units in the original compressed segment to a new compressed segment in a substantially contiguous manner; updating the extent list to identify the referenced compressed allocation units in the new compressed segment, and the pointer to where the new compressed segment is stored; and freeing the original compressed segment.