A dynamic caching technique adaptively controls copies of data blocks stored within caches (“cached copies”) of a caching layer distributed among servers of a distributed data processing system. A cache coordinator of the distributed system implements the dynamic caching technique to increase the cached copies of the data blocks to improve processing performance of the servers. Alternatively, the technique may decrease the cached copies to reduce storage capacity of the servers. The technique may increase the cached copies when it detects local and/or remote cache bottleneck conditions at the servers, a data popularity condition at the servers, or a shared storage bottleneck condition at the storage system. Otherwise, the technique may decrease the cached copies at the servers.