diff --git a/pkg/harvester/config/labels-annotations.js b/pkg/harvester/config/labels-annotations.js
index 0dd01da0..e52e577e 100644
--- a/pkg/harvester/config/labels-annotations.js
+++ b/pkg/harvester/config/labels-annotations.js
@@ -50,6 +50,7 @@ export const HCI = {
   STORAGE_NETWORK:                  'storage-network.settings.harvesterhci.io',
   ADDON_EXPERIMENTAL:               'addon.harvesterhci.io/experimental',
   VOLUME_ERROR:                     'longhorn.io/volume-scheduling-error',
+  VOLUME_FOR_VM:                    'harvesterhci.io/volumeForVirtualMachine',
   KVM_AMD_CPU:                      'cpu-feature.node.kubevirt.io/svm',
   KVM_INTEL_CPU:                    'cpu-feature.node.kubevirt.io/vmx',
   NODE_MANUFACTURER:                'manufacturer',
diff --git a/pkg/harvester/config/types.js b/pkg/harvester/config/types.js
index d07bacc9..552f9361 100644
--- a/pkg/harvester/config/types.js
+++ b/pkg/harvester/config/types.js
@@ -7,3 +7,8 @@ export const NETWORK_TYPE = {
   L2VLAN:   'L2VlanNetwork',
   UNTAGGED: 'UntaggedNetwork'
 };
+
+export const VOLUME_MODE = {
+  BLOCK:       'Block',
+  FILE_SYSTEM: 'Filesystem'
+};
diff --git a/pkg/harvester/edit/harvesterhci.io.volume.vue b/pkg/harvester/edit/harvesterhci.io.volume.vue
index f9e36d84..ad93ce1c 100644
--- a/pkg/harvester/edit/harvesterhci.io.volume.vue
+++ b/pkg/harvester/edit/harvesterhci.io.volume.vue
@@ -22,6 +22,7 @@ import { HCI, VOLUME_SNAPSHOT } from '../types';
 import { LVM_DRIVER } from '../models/harvester/storage.k8s.io.storageclass';
 import { DATA_ENGINE_V2 } from '../models/harvester/persistentvolumeclaim';
 import { GIBIBYTE } from '../utils/unit';
+import { VOLUME_MODE } from '@pkg/harvester/config/types';
 
 export default {
   name: 'HarvesterVolume',
@@ -73,7 +74,8 @@ export default {
 
   data() {
     if (this.mode === _CREATE) {
-      this.value.spec.volumeMode = 'Block';
+      // default volumeMode to Block
+      this.value.spec.volumeMode = VOLUME_MODE.BLOCK;
       this.value.spec.accessModes = ['ReadWriteMany'];
     }
 
@@ -126,6 +128,10 @@ export default {
       return InterfaceOption;
     },
 
+    volumeModeOptions() {
+      return Object.values(VOLUME_MODE);
+    },
+
     imageOption() {
       return sortBy(
         this.images
@@ -179,6 +185,25 @@ export default {
       return this.$store.getters[`${ inStore }/all`](STORAGE_CLASS);
     },
 
+    isLonghornStorageClass() {
+      const selectedSC = this.storageClasses.find((sc) => sc.name === this.value?.spec?.storageClassName) || {};
+
+      return selectedSC && selectedSC.isLonghorn;
+    },
+
+    showVolumeMode() {
+      // we won't let user choose volumeMode if source = vmimage
+      if (!this.value.thirdPartyStorageFeatureEnabled || this.isVMImage || !!this.value?.spec?.storageClassName === false) {
+        return false;
+      }
+
+      if (this.isLonghornStorageClass) {
+        return false;
+      }
+
+      return true;
+    },
+
     storageClassOptions() {
       return this.storageClasses.filter((s) => !s.parameters?.backingImage).map((s) => {
         const label = s.isDefault ? `${ s.name } (${ this.t('generic.default') })` : s.name;
@@ -237,7 +262,43 @@ export default {
     }
   },
 
+  watch: {
+    'source'(neu) {
+      if (neu === 'url') {
+        this.setBlockVolumeMode();
+        this.deleteVolumeForVmAnnotation();
+      }
+    },
+    'value.spec.storageClassName'() {
+      if (this.isLonghornStorageClass) {
+        this.setBlockVolumeMode();
+        this.deleteVolumeForVmAnnotation();
+      }
+    },
+    'value.spec.volumeMode'(neu) {
+      if (neu === VOLUME_MODE.FILE_SYSTEM) {
+        this.setVolumeForVmAnnotation();
+      } else if (neu === VOLUME_MODE.BLOCK ) {
+        this.deleteVolumeForVmAnnotation();
+      }
+    }
+  },
+
   methods: {
+    setBlockVolumeMode() {
+      this.value.spec.volumeMode = VOLUME_MODE.BLOCK;
+    },
+
+    setVolumeForVmAnnotation() {
+      this.value.setAnnotation(HCI_ANNOTATIONS.VOLUME_FOR_VM, 'true');
+    },
+
+    deleteVolumeForVmAnnotation() {
+      if (this.value?.metadata?.annotations?.[HCI_ANNOTATIONS.VOLUME_FOR_VM]) {
+        delete this.value.metadata.annotations[HCI_ANNOTATIONS.VOLUME_FOR_VM];
+      }
+    },
+
     getAccessMode() {
       if (!this.longhornV2LVMSupport) {
         return ['ReadWriteMany'];
@@ -359,7 +420,7 @@ export default {
         />
 
         <LabeledSelect
-          v-if="source === 'blank'"
+          v-if="isBlank"
           v-model:value="value.spec.storageClassName"
           :options="storageClassOptions"
           :label="t('harvester.storage.storageClass.label')"
@@ -369,6 +430,18 @@ export default {
           @update:value="update"
         />
 
+        <LabeledSelect
+          v-if="showVolumeMode"
+          v-model:value="value.spec.volumeMode"
+          :label="t('harvester.volume.volumeMode')"
+          :options="volumeModeOptions"
+          required
+          :disabled="!isCreate"
+          :mode="mode"
+          class="mb-20"
+          @update:value="update"
+        />
+
         <UnitInput
           v-model:value="storage"
           :label="t('harvester.volume.size')"
diff --git a/pkg/harvester/edit/kubevirt.io.virtualmachine/VirtualMachineVolume/index.vue b/pkg/harvester/edit/kubevirt.io.virtualmachine/VirtualMachineVolume/index.vue
index 82108eac..29888929 100644
--- a/pkg/harvester/edit/kubevirt.io.virtualmachine/VirtualMachineVolume/index.vue
+++ b/pkg/harvester/edit/kubevirt.io.virtualmachine/VirtualMachineVolume/index.vue
@@ -17,6 +17,7 @@ import { PLUGIN_DEVELOPER, DEV } from '@shell/store/prefs';
 import { SOURCE_TYPE } from '../../../config/harvester-map';
 import { PRODUCT_NAME as HARVESTER_PRODUCT } from '../../../config/harvester';
 import { HCI } from '../../../types';
+import { VOLUME_MODE } from '@pkg/harvester/config/types';
 
 export default {
   emits: ['update:value'],
@@ -62,7 +63,7 @@ export default {
 
     customVolumeMode: {
       type:    String,
-      default: 'Block'
+      default: VOLUME_MODE.Block
     },
 
     customAccessMode: {
diff --git a/pkg/harvester/l10n/en-us.yaml b/pkg/harvester/l10n/en-us.yaml
index cf51ab48..1610691a 100644
--- a/pkg/harvester/l10n/en-us.yaml
+++ b/pkg/harvester/l10n/en-us.yaml
@@ -791,6 +791,7 @@ harvester:
       datasource: Data Source
       details: Details
     size: Size
+    volumeMode: Volume Mode
     source: Source
     kind: Kind
     sourceOptions:
diff --git a/pkg/harvester/mixins/harvester-vm/index.js b/pkg/harvester/mixins/harvester-vm/index.js
index 8c0b3bed..e4d4c225 100644
--- a/pkg/harvester/mixins/harvester-vm/index.js
+++ b/pkg/harvester/mixins/harvester-vm/index.js
@@ -26,6 +26,7 @@ import { HCI } from '../../types';
 import { parseVolumeClaimTemplates } from '../../utils/vm';
 import impl, { QGA_JSON, USB_TABLET } from './impl';
 import { GIBIBYTE } from '../../utils/unit';
+import { VOLUME_MODE } from '@pkg/harvester/config/types';
 
 const LONGHORN_V2_DATA_ENGINE = 'longhorn-system/v2-data-engine';
 
@@ -261,7 +262,7 @@ export default {
     },
 
     customVolumeMode() {
-      return this.storageClassSetting.volumeMode || 'Block';
+      return this.storageClassSetting.volumeMode || VOLUME_MODE.BLOCK;
     },
 
     customAccessMode() {
@@ -463,7 +464,7 @@ export default {
           type,
           storageClassName: '',
           image:            this.imageId,
-          volumeMode:       'Block',
+          volumeMode:       VOLUME_MODE.BLOCK,
           isEncrypted,
           volumeBackups,
         });
@@ -522,7 +523,7 @@ export default {
               accessMode = pvcResource?.spec?.accessModes?.[0] || 'ReadWriteMany';
               size = pvcResource?.spec?.resources?.requests?.storage || '10Gi';
               storageClassName = pvcResource?.spec?.storageClassName;
-              volumeMode = pvcResource?.spec?.volumeMode || 'Block';
+              volumeMode = pvcResource?.spec?.volumeMode || VOLUME_MODE.BLOCK;
               volumeName = pvcResource?.metadata?.name || '';
             }
 
diff --git a/pkg/harvester/models/harvester/storage.k8s.io.storageclass.js b/pkg/harvester/models/harvester/storage.k8s.io.storageclass.js
index 2470e542..312a3c6d 100644
--- a/pkg/harvester/models/harvester/storage.k8s.io.storageclass.js
+++ b/pkg/harvester/models/harvester/storage.k8s.io.storageclass.js
@@ -62,6 +62,10 @@ export default class HciStorageClass extends StorageClass {
     return this.parameters?.encrypted === 'true';
   }
 
+  get isLonghorn() {
+    return this.provisioner === LONGHORN_DRIVER;
+  }
+
   get isLonghornV1() {
     return this.provisioner === LONGHORN_DRIVER && this.longhornVersion === DATA_ENGINE_V1;
   }