A method and system for handling temporary data of a virtual machine are described. In one embodiment, virtual machines are hosted by a server and accessed by remote clients over a network. The server assigns first storage and second storage to each virtual machine, where the first storage is designated for temporary data of a respective virtual machine and the second storage is designated for persistent data of a respective virtual machine. The server monitors events pertaining to the virtual machine. Upon detecting a predefined event pertaining to one of the virtual machines, the server causes at least a subset of the temporary data to be removed from the first storage of this virtual machine.