A data storage system protects virtual machines using block-level backup operations and restores the data at a file level. The system accesses the virtual machine file information from the file allocation table of the host system underlying the virtualization layer. A file index associates this virtual machine file information with the related protected blocks in a secondary storage device during the block-level backup. Using the file index, the system can identify the specific blocks in the secondary storage device associated with a selected restore file. As a result, file level granularity for restore operations is possible for virtual machine data protected by block-level backup operations without restoring more than the selected file blocks from the block-level backup data.