Embodiments of the invention relate to reducing energy consumption and optimizing workload and performance in multi-tier storage systems using extent-level dynamic tiering. An aspect of the invention includes a receiving data access information of a storage extent stored in a storage system and utilization information of storage devices in the storage system. The storage system includes a plurality of storage tiers and each of the plurality of storage tiers is made up of a plurality of storage devices. Storage resources required for each of the plurality of the storage tiers to satisfy the storage extent's performance and capacity requirements are estimated based on the data access information. One storage tier that would incur the lowest power consumption to the storage system for satisfying the storage extent's performance and capacity requirements is determined. The one storage tier is determined by calculating the amount of power that would be consumed by the storage extent in each of the plurality of storage tiers based on the estimated storage resources. At least one storage device in the one storage tier that has available storage resources that would satisfy the storage extent's performance and capacity requirements is determined based on the data access information and utilization information. The storage extent is allocated to the one storage tier and to one storage device (among the at least one storage device) that has the least amount of available storage capacity.