Optimized extended context management for virtual machines is disclosed. An example system includes a memory, processor, VM, and kernel, which executes the VM using guest space, stores a guest state in an extended state register, which the VM has access to, receives an instruction, saves the guest state, and determines whether the kernel is configured to handle the process using kernel space. If so, the process is handled using kernel space without using user space, and if not, a user state in the extended state register is restored, the process is handled using user space, an updated user state is stored in the extended state register, the updated user state is saved, and the guest state is restored in the extended state register. Finally, execution of the VM using the guest space is resumed.