A virtual drive data storage refactoring system includes a base drive, a plurality of virtual drives coupled to the base drive and hierachly below the base drive, wherein the virtual drives each include a plurality of data storage blocks and a virtual drive controller system. The virtual drive controller system is operable to coordinate data storage on the base drive and the plurality of virtual drives. The virtual drive controller system is operable to compute a signature for each data storage block, create a list of data content for each data storage block, wherein the list is sorted according to the signature for each data storage block, locate the signatures for each data storage block that appear on each of the virtual drives, arrange the data storage blocks on the virtual drives so that data storage blocks having data content that is the same, are located in corresponding locations on each of the virtual drives, and remove the data storage blocks having data content that is the same from each of the virtual drives to a data storage drive that is hierarchly above the virtual drives.