diff --git a/pcsx2/DEV9/ATA/HddCreate.cpp b/pcsx2/DEV9/ATA/HddCreate.cpp
index 62eaea78b7..bb23d31d40 100644
--- a/pcsx2/DEV9/ATA/HddCreate.cpp
+++ b/pcsx2/DEV9/ATA/HddCreate.cpp
@@ -20,17 +20,29 @@
 #include <fmt/format.h>
 #include "HddCreate.h"
 
+#if _WIN32
+#include "common/RedtapeWindows.h"
+#include "common/StringUtil.h"
+#include <winioctl.h>
+#include <io.h>
+#elif defined(__POSIX__)
+#include <unistd.h>
+#include <sys/types.h>
+#include <sys/stat.h>
+#include <fcntl.h>
+#endif
+
 void HddCreate::Start()
 {
 	Init();
-	WriteImage(filePath, neededSize);
+	WriteImage(filePath, neededSize, 1024);
 	Cleanup();
 }
 
-void HddCreate::WriteImage(std::string hddPath, u64 reqSizeBytes)
+void HddCreate::WriteImage(std::string hddPath, u64 fileBytes, u64 zeroSizeBytes)
 {
 	constexpr int buffsize = 4 * 1024;
-	u8 buff[buffsize] = {0}; //4kb
+	u8 buff[buffsize] = {0}; // 4kb.
 
 	if (FileSystem::FileExists(hddPath.c_str()))
 	{
@@ -47,35 +59,154 @@ void HddCreate::WriteImage(std::string hddPath, u64 reqSizeBytes)
 		return;
 	}
 
-	//Size file
-	const char zero = 0;
-	bool success = FileSystem::FSeek64(newImage.get(), reqSizeBytes - 1, SEEK_SET) == 0;
-	success = success && std::fwrite(&zero, 1, 1, newImage.get()) == 1;
-	success = success && FileSystem::FSeek64(newImage.get(), 0, SEEK_SET) == 0;
+	bool sparseSupported = false;
+#ifdef _WIN32
+	// Handle owned by CFile.
+	HANDLE nativeFile = reinterpret_cast<HANDLE>(_get_osfhandle(_fileno(newImage.get())));
 
-	if (!success)
+	if (nativeFile == INVALID_HANDLE_VALUE)
 	{
+		Console.Error("DEV9: HddCreate: failed to get handle");
 		newImage.reset();
-		FileSystem::DeleteFilePath(filePath.c_str());
+		FileSystem::DeleteFilePath(hddPath.c_str());
 		errored.store(true);
 		SetError();
 		return;
 	}
 
+	// Check if we support sparse files.
+	DWORD dwFlags;
+	if (GetVolumeInformationByHandleW(nativeFile, nullptr, 0, nullptr, nullptr, &dwFlags, nullptr, 0) == FALSE)
+	{
+		Console.Error("DEV9: HddCreate: failed to check sparse");
+		newImage.reset();
+		FileSystem::DeleteFilePath(hddPath.c_str());
+		errored.store(true);
+		SetError();
+		return;
+	}
+
+	if (dwFlags & FILE_SUPPORTS_SPARSE_FILES)
+	{
+		// Sparse files supported.
+		FILE_SET_SPARSE_BUFFER sparseSetting;
+		sparseSetting.SetSparse = true;
+		FILE_ZERO_DATA_INFORMATION sparseRange;
+		sparseRange.FileOffset.QuadPart = 0;
+		sparseRange.BeyondFinalZero.QuadPart = fileBytes;
+		DWORD dwTemp;
+
+		if ((DeviceIoControl(nativeFile, FSCTL_SET_SPARSE, &sparseSetting, sizeof(sparseSetting), nullptr, 0, &dwTemp, nullptr) == FALSE) ||
+			(DeviceIoControl(nativeFile, FSCTL_SET_ZERO_DATA, &sparseRange, sizeof(sparseRange), nullptr, 0, &dwTemp, nullptr) == FALSE))
+		{
+			Console.Error("DEV9: HddCreate: Failed to set sparse");
+			newImage.reset();
+			FileSystem::DeleteFilePath(hddPath.c_str());
+			errored.store(true);
+			SetError();
+			return;
+		}
+
+		sparseSupported = true;
+	}
+
+	// Set filesize.
+	LARGE_INTEGER seekStart;
+	seekStart.QuadPart = 0;
+	LARGE_INTEGER seekEnd;
+	seekEnd.QuadPart = fileBytes;
+
+	if ((SetFilePointerEx(nativeFile, seekEnd, nullptr, FILE_BEGIN) == FALSE) ||
+		(SetEndOfFile(nativeFile) == FALSE) ||
+		(SetFilePointerEx(nativeFile, seekStart, nullptr, FILE_BEGIN) == FALSE))
+	{
+		Console.Error("DEV9: HddCreate: Failed to set size");
+		newImage.reset();
+		FileSystem::DeleteFilePath(hddPath.c_str());
+		errored.store(true);
+		SetError();
+		return;
+	}
+
+#elif defined(__POSIX__)
+	// Handle owned by CFile.
+	int nativeFile = fileno(newImage.get());
+
+	if (nativeFile == -1)
+	{
+		Console.Error("DEV9: HddCreate: failed to get handle");
+		newImage.reset();
+		FileSystem::DeleteFilePath(hddPath.c_str());
+		errored.store(true);
+		SetError();
+		return;
+	}
+
+	// Set filesize.
+	if ((ftruncate(nativeFile, fileBytes) == -1) ||
+		(lseek(nativeFile, 0, SEEK_SET) == -1))
+	{
+		Console.Error("DEV9: HddCreate: Failed to set size");
+		newImage.reset();
+		FileSystem::DeleteFilePath(hddPath.c_str());
+		errored.store(true);
+		SetError();
+		return;
+	}
+
+	// Check the blocks allocated to determine if file is spasre.
+	// Assume that we don't get a false positive from filesystems only supporting ValidDataLength.
+	struct stat fileInfo;
+	if (fstat(nativeFile, &fileInfo) == -1)
+	{
+		Console.Error("DEV9: HddCreate: Failed to check sparse");
+		// Set filesize to zero to avoid potential freeze on close.
+		// Ignore any error, can't do much if this fails anyway.
+		[[maybe_unused]] int i = ftruncate(nativeFile, 0);
+		newImage.reset();
+		FileSystem::DeleteFilePath(hddPath.c_str());
+		errored.store(true);
+		SetError();
+		return;
+	}
+
+	if (fileInfo.st_blocks != static_cast<s64>(fileBytes / 512))
+	{
+		// Sparse files supported.
+		sparseSupported = true;
+		// File is automatically sparse.
+	}
+#endif
+
 	lastUpdate = std::chrono::steady_clock::now();
 
-	//Round up
-	const s32 reqMiB = (reqSizeBytes + ((1024 * 1024) - 1)) / (1024 * 1024);
-	for (s32 iMiB = 0; iMiB < reqMiB; iMiB++)
+	// Round up.
+	const s32 reqMiB = (fileBytes + ((1024 * 1024) - 1)) / (1024 * 1024);
+	const s32 zeroMiB = (zeroSizeBytes + ((1024 * 1024) - 1)) / (1024 * 1024);
+
+	s32 iMiB = 0;
+	if (sparseSupported)
+		iMiB = reqMiB - zeroMiB;
+
+	for (; iMiB < reqMiB; iMiB++)
 	{
-		//Round down
-		const s32 req4Kib = std::min<s32>(1024, (reqSizeBytes / 1024) - (u64)iMiB * 1024) / 4;
+		// Round down.
+		const s32 req4Kib = std::min<s32>(1024, (fileBytes / 1024) - (u64)iMiB * 1024) / 4;
 		for (s32 i4kb = 0; i4kb < req4Kib; i4kb++)
 		{
 			if (std::fwrite(buff, buffsize, 1, newImage.get()) != 1)
 			{
+				std::fflush(newImage.get());
+				// Set filesize to zero to avoid potential freeze on close.
+#ifdef _WIN32
+				SetFilePointerEx(nativeFile, seekStart, nullptr, FILE_BEGIN);
+				SetEndOfFile(nativeFile);
+#elif defined(__POSIX__)
+				// Ignore any error, can't do much if this fails anyway.
+				[[maybe_unused]] int i = ftruncate(nativeFile, 0);
+#endif
 				newImage.reset();
-				FileSystem::DeleteFilePath(filePath.c_str());
+				FileSystem::DeleteFilePath(hddPath.c_str());
 				errored.store(true);
 				SetError();
 				return;
@@ -84,11 +215,20 @@ void HddCreate::WriteImage(std::string hddPath, u64 reqSizeBytes)
 
 		if (req4Kib != 256)
 		{
-			const s32 remainingBytes = reqSizeBytes - (((u64)iMiB) * (1024 * 1024) + req4Kib * 4096);
+			const s32 remainingBytes = fileBytes - (((u64)iMiB) * (1024 * 1024) + req4Kib * 4096);
 			if (std::fwrite(buff, remainingBytes, 1, newImage.get()) != 1)
 			{
+				std::fflush(newImage.get());
+				// Set filesize to zero to avoid potential freeze on close.
+#ifdef _WIN32
+				SetFilePointerEx(nativeFile, seekStart, nullptr, FILE_BEGIN);
+				SetEndOfFile(nativeFile);
+#elif defined(__POSIX__)
+				// Ignore any error, can't do much if this fails anyway.
+				[[maybe_unused]] int i = ftruncate(nativeFile, 0);
+#endif
 				newImage.reset();
-				FileSystem::DeleteFilePath(filePath.c_str());
+				FileSystem::DeleteFilePath(hddPath.c_str());
 				errored.store(true);
 				SetError();
 				return;
@@ -103,8 +243,17 @@ void HddCreate::WriteImage(std::string hddPath, u64 reqSizeBytes)
 		}
 		if (canceled.load())
 		{
+			std::fflush(newImage.get());
+			// Set filesize to zero to avoid potential freeze on close.
+#ifdef _WIN32
+			SetFilePointerEx(nativeFile, seekStart, nullptr, FILE_BEGIN);
+			SetEndOfFile(nativeFile);
+#elif defined(__POSIX__)
+			// Ignore any error, can't do much if this fails anyway.
+			[[maybe_unused]] int i = ftruncate(nativeFile, 0);
+#endif
 			newImage.reset();
-			FileSystem::DeleteFilePath(filePath.c_str());
+			FileSystem::DeleteFilePath(hddPath.c_str());
 			errored.store(true);
 			SetError();
 			return;
diff --git a/pcsx2/DEV9/ATA/HddCreate.h b/pcsx2/DEV9/ATA/HddCreate.h
index 0bd21fcbae..936247f5ee 100644
--- a/pcsx2/DEV9/ATA/HddCreate.h
+++ b/pcsx2/DEV9/ATA/HddCreate.h
@@ -49,5 +49,5 @@ protected:
 	void SetCanceled();
 
 private:
-	void WriteImage(std::string hddPath, u64 reqSizeBytes);
+	void WriteImage(std::string hddPath, u64 fileBytes, u64 zeroSizeBytes);
 };