Implementing VM memory right-sizing using VM memory compression

A method and system are provided for implementing virtual machine (VM) memory right-sizing using VM memory compression. VM memory right-sizing includes monitoring VM memory utilization relative to a memory utilization up-size threshold and a memory utilization down-size threshold for the VM, and a current memory compression factor of total effective memory based on compression. When the VM is above the memory utilization up-size threshold and at a maximum memory allocation, a memory compression factor is increased. When the VM is below the memory utilization down-size threshold and the current memory compression factor is greater than one, the memory compression factor is decreased.