diff --git a/pkg/driver/qemu/qemu.go b/pkg/driver/qemu/qemu.go
index 529b37471c8..c1f43eed3d7 100644
--- a/pkg/driver/qemu/qemu.go
+++ b/pkg/driver/qemu/qemu.go
@@ -86,7 +86,8 @@ func minimumQemuVersion() (hardMin, softMin semver.Version) {
 	return hardMin, softMin
 }
 
-// EnsureDisk also ensures the kernel and the initrd.
+// EnsureDisk just renames baseDisk to diffDisk, unless baseDisk is an ISO9660 image.
+// Note that "diffDisk" is a misnomer, it is actually created as a full disk since Lima v2.0.
 func EnsureDisk(ctx context.Context, cfg Config) error {
 	diffDisk := filepath.Join(cfg.InstanceDir, filenames.DiffDisk)
 	if _, err := os.Stat(diffDisk); err == nil || !errors.Is(err, os.ErrNotExist) {
@@ -114,10 +115,14 @@ func EnsureDisk(ctx context.Context, cfg Config) error {
 	if baseDiskInfo.Format == "" {
 		return fmt.Errorf("failed to inspect the format of %q", baseDisk)
 	}
-	args := []string{"create", "-f", "qcow2"}
 	if !isBaseDiskISO {
-		args = append(args, "-F", baseDiskInfo.Format, "-b", baseDisk)
+		// "diffdisk" is a misnomer, it is actually created as a full disk since Lima v2.0.
+		if err = os.Rename(baseDisk, diffDisk); err != nil {
+			return err
+		}
+		return nil
 	}
+	args := []string{"create", "-f", "qcow2"}
 	args = append(args, diffDisk, strconv.Itoa(int(diskSize)))
 	cmd := exec.CommandContext(ctx, "qemu-img", args...)
 	if out, err := cmd.CombinedOutput(); err != nil {
@@ -718,9 +723,15 @@ func Cmdline(ctx context.Context, cfg Config) (exe string, args []string, err er
 		extraDisks = append(extraDisks, dataDisk)
 	}
 
-	isBaseDiskCDROM, err := iso9660util.IsISO9660(baseDisk)
-	if err != nil {
-		return "", nil, err
+	var baseDiskExists, isBaseDiskCDROM bool
+	if _, err := os.Stat(baseDisk); !errors.Is(err, os.ErrNotExist) {
+		baseDiskExists = true
+	}
+	if baseDiskExists {
+		isBaseDiskCDROM, err = iso9660util.IsISO9660(baseDisk)
+		if err != nil {
+			return "", nil, err
+		}
 	}
 	if isBaseDiskCDROM {
 		args = appendArgsIfNoConflict(args, "-boot", "order=d,splash-time=0,menu=on")
@@ -730,7 +741,8 @@ func Cmdline(ctx context.Context, cfg Config) (exe string, args []string, err er
 	}
 	if diskSize, _ := units.RAMInBytes(*cfg.LimaYAML.Disk); diskSize > 0 {
 		args = append(args, "-drive", fmt.Sprintf("file=%s,if=virtio,discard=on", diffDisk))
-	} else if !isBaseDiskCDROM {
+	} else if baseDiskExists && !isBaseDiskCDROM { // FIXME: How does this happen? Is this even a valid case?
+		logrus.Errorf("weird configuration, how does this happen?: diskSize /* %d */ <= 0 && baseDiskExists && !isBaseDiskCDROM", diskSize)
 		baseDiskInfo, err := qemuimgutil.GetInfo(ctx, baseDisk)
 		if err != nil {
 			return "", nil, fmt.Errorf("failed to get the information of %q: %w", baseDisk, err)
diff --git a/pkg/driver/vz/disk.go b/pkg/driver/vz/disk.go
index 9cb81e06c5c..a451b45ff74 100644
--- a/pkg/driver/vz/disk.go
+++ b/pkg/driver/vz/disk.go
@@ -18,6 +18,8 @@ import (
 	"github.com/lima-vm/lima/v2/pkg/limatype/filenames"
 )
 
+// EnsureDisk just converts baseDisk (can be qcow2) to diffDisk (raw), unless baseDisk is an ISO9660 image.
+// Note that "diffDisk" is a misnomer, it is actually created as a full disk in the case of VZ.
 func EnsureDisk(ctx context.Context, inst *limatype.Instance) error {
 	diffDisk := filepath.Join(inst.Dir, filenames.DiffDisk)
 	if _, err := os.Stat(diffDisk); err == nil || !errors.Is(err, os.ErrNotExist) {
@@ -33,26 +35,33 @@ func EnsureDisk(ctx context.Context, inst *limatype.Instance) error {
 	if diskSize == 0 {
 		return nil
 	}
-	isBaseDiskISO, err := iso9660util.IsISO9660(baseDisk)
-	if err != nil {
-		return err
-	}
-	if isBaseDiskISO {
-		// Create an empty data volume (sparse)
-		diffDiskF, err := os.Create(diffDisk)
+	var isBaseDiskISO bool
+	if _, err := os.Stat(baseDisk); !errors.Is(err, os.ErrNotExist) {
+		isBaseDiskISO, err = iso9660util.IsISO9660(baseDisk)
 		if err != nil {
 			return err
 		}
+		if isBaseDiskISO {
+			// Create an empty data volume (sparse)
+			diffDiskF, err := os.Create(diffDisk)
+			if err != nil {
+				return err
+			}
 
-		err = diskUtil.MakeSparse(ctx, diffDiskF, 0)
-		if err != nil {
-			diffDiskF.Close()
-			return fmt.Errorf("failed to create sparse diff disk %q: %w", diffDisk, err)
+			err = diskUtil.MakeSparse(ctx, diffDiskF, 0)
+			if err != nil {
+				diffDiskF.Close()
+				return fmt.Errorf("failed to create sparse diff disk %q: %w", diffDisk, err)
+			}
+			return diffDiskF.Close()
 		}
-		return diffDiskF.Close()
 	}
-	if err = diskUtil.ConvertToRaw(ctx, baseDisk, diffDisk, &diskSize, false); err != nil {
+	// "diffdisk" is a misnomer, it is actually created as a full disk in the case of VZ.
+	if err := diskUtil.ConvertToRaw(ctx, baseDisk, diffDisk, &diskSize, false); err != nil {
 		return fmt.Errorf("failed to convert %q to a raw disk %q: %w", baseDisk, diffDisk, err)
 	}
-	return err
+	if err := os.RemoveAll(baseDisk); err != nil {
+		return err
+	}
+	return nil
 }
diff --git a/pkg/driver/vz/vm_darwin.go b/pkg/driver/vz/vm_darwin.go
index ec45e39832f..2183defc145 100644
--- a/pkg/driver/vz/vm_darwin.go
+++ b/pkg/driver/vz/vm_darwin.go
@@ -463,9 +463,15 @@ func attachDisks(ctx context.Context, inst *limatype.Instance, vmConfig *vz.Virt
 	baseDiskPath := filepath.Join(inst.Dir, filenames.BaseDisk)
 	diffDiskPath := filepath.Join(inst.Dir, filenames.DiffDisk)
 	ciDataPath := filepath.Join(inst.Dir, filenames.CIDataISO)
-	isBaseDiskCDROM, err := iso9660util.IsISO9660(baseDiskPath)
-	if err != nil {
-		return err
+	var (
+		isBaseDiskCDROM bool
+		err             error
+	)
+	if _, err := os.Stat(baseDiskPath); !errors.Is(err, os.ErrNotExist) {
+		isBaseDiskCDROM, err = iso9660util.IsISO9660(baseDiskPath)
+		if err != nil {
+			return err
+		}
 	}
 	var configurations []vz.StorageDeviceConfiguration
 
diff --git a/pkg/instance/start.go b/pkg/instance/start.go
index f29db3ed51d..20563bf02a2 100644
--- a/pkg/instance/start.go
+++ b/pkg/instance/start.go
@@ -28,6 +28,7 @@ import (
 	"github.com/lima-vm/lima/v2/pkg/imgutil/proxyimgutil"
 	"github.com/lima-vm/lima/v2/pkg/limatype"
 	"github.com/lima-vm/lima/v2/pkg/limatype/filenames"
+	"github.com/lima-vm/lima/v2/pkg/limayaml"
 	"github.com/lima-vm/lima/v2/pkg/registry"
 	"github.com/lima-vm/lima/v2/pkg/store"
 	"github.com/lima-vm/lima/v2/pkg/usrlocalsharelima"
@@ -65,11 +66,12 @@ func Prepare(ctx context.Context, inst *limatype.Instance, guestAgent string) (*
 		return nil, err
 	}
 
-	// Check if the instance has been created (the base disk already exists)
-	baseDisk := filepath.Join(inst.Dir, filenames.BaseDisk)
-	_, err = os.Stat(baseDisk)
-	created := err == nil
+	// Check if the instance has been created
+	created := limayaml.IsExistingInstanceDir(inst.Dir)
 
+	// baseDisk is usually immediately renamed to diffDisk (misnomer) by the VM driver,
+	// except when baseDisk is an ISO9660 image.
+	baseDisk := filepath.Join(inst.Dir, filenames.BaseDisk)
 	kernel := filepath.Join(inst.Dir, filenames.Kernel)
 	kernelCmdline := filepath.Join(inst.Dir, filenames.KernelCmdline)
 	initrd := filepath.Join(inst.Dir, filenames.Initrd)
diff --git a/pkg/limatype/filenames/filenames.go b/pkg/limatype/filenames/filenames.go
index a8459d77888..7f44624e79b 100644
--- a/pkg/limatype/filenames/filenames.go
+++ b/pkg/limatype/filenames/filenames.go
@@ -36,8 +36,8 @@ const (
 	CIDataISO               = "cidata.iso"
 	CIDataISODir            = "cidata"
 	CloudConfig             = "cloud-config.yaml"
-	BaseDisk                = "basedisk"
-	DiffDisk                = "diffdisk"
+	BaseDisk                = "basedisk" // usually immediately converted/renamed to diffDisk by the VM driver
+	DiffDisk                = "diffdisk" // misnomer; actually a full disk since Lima v2.0
 	Kernel                  = "kernel"
 	KernelCmdline           = "kernel.cmdline"
 	Initrd                  = "initrd"
diff --git a/website/content/en/docs/dev/internals.md b/website/content/en/docs/dev/internals.md
index 559f9ed75bd..02872aef5fb 100644
--- a/website/content/en/docs/dev/internals.md
+++ b/website/content/en/docs/dev/internals.md
@@ -44,8 +44,11 @@ Ansible:
 - `ansible-inventory.yaml`: the Ansible node inventory. See [ansible](#ansible).
 
 disk:
-- `basedisk`: the base image
-- `diffdisk`: the diff image (QCOW2)
+- `basedisk`: the historical base image. Can be missing since Lima v2.0.
+  - The main `limactl` process prepares this `basedisk`, however, a [VM driver](./drivers.md) may convert and rename `basedisk` to `diffdisk` immediately.
+- `diffdisk`: the image, historically a QCOW2 diff from `basedisk`.
+  - `diffdisk` is a misnomer; it does not necessarily have a reference to `basedisk`.
+    Notably, when a `basedisk` is an ISO9660 image, or the VM driver does not support differencing, `diffdisk` is an independent image.
 
 kernel:
 - `kernel`: the kernel