The HPFS file system was first introduced with OS/2 1.2 to allow for greater access to the larger hard drives that were then appearing on the market. Additionally, it was necessary for a new file system to extend the naming system, organization, and security for the growing demands of the network server market. HPFS maintains the directory organization of FAT, but adds automatic sorting of the directory based on filenames. Filenames are extended to up to 254 double byte characters. HPFS also allows a file to be composed of "data" and special attributes to allow for increased flexibility in terms of supporting other naming conventions and security. In addition, the unit of allocation is changed from clusters to physical sectors (512 bytes), which reduces lost disk space.

Under HPFS, directory entries hold more information than under FAT. As well as the attribute file, this includes information about the modification, creation, and access date and times. Instead of pointing to the first cluster of the file, the directory entries under HPFS point to the FNODE. The FNODE can contain the file's data, or pointers that may point to the file's data or to other structures that will eventually point to the file's data.

HPFS attempts to allocate as much of a file in contiguous sectors as possible. This is done in order to increase speed when doing sequential processing of a file.

HPFS organizes a drive into a series of 8 MB bands, and whenever possible a file is contained within one of these bands. Between each of these bands are 2K allocation bitmaps, which keep track of which sectors within a band have and have not been allocated. Banding increases performance because the drive head does not have to return to the logical top (typically cylinder 0) of the disk, but to the nearest band allocation bitmap to determine where a file is to be stored.

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