Desktop image management for virtual desktops using on-demand stub creation

A desktop image management system is described that can efficiently distribute updates to virtual desktops running on host servers in a data center. The system is comprised of a central server and multiple agents, each agent installed on a virtual machine. When a VM receives an update from the central server, the files are stored in a single instance store on the host server. On a first request to open the directory containing the files on the VM, corresponding stub files are created on-demand for each file in the single instance store. The stub files are marked to indicate that they are mapped to the single instance store. Subsequently, when the guest operating system requests to read the stub file, the virtual disk layer of the host server detects that the requested block has been marked and fetches the content of the file from the single instance store.