Abstract: A method and system for management of physical memory of Virtual Machines (VMs) using dynamic memory reallocation based on estimated usages by each of the VMs is provided. A host has different VMs with respective Guest OSs running on the host OS. The Guest OS of an exemplary VM has a balloon agent driver running on it. The balloon agent driver collects Guest OS statistics and calculates Working Set Size (WSS) of the Guest OS based on the Guest OS statistics. The WSS is provided to a Hypervisor via a Virtual Machine Monitor (VMM). The Hypervisor adjusts the size of the ballooned memory based on the calculated WSS and the virtualization statistics collected by the Hypervisor using the VMM.