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I believe the 360 uses the FATX file-system. How would I go about getting software to partition a USB portable hard drive for use on an Xbox? (I don't think Partition Magic supports FATX.)

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When it comes to external storage, the Xbox 360 actually just writes its own filesystem into a file. The Xbox 360 will create up to 16 files, each 1 GB in size, for a maximum of 16GB, even if the size of the external drive is greater than 16GB. Your game data will be stored inside these files. The only requirement is that the drive/partition must be formatted FAT32.

FAT32 has a 32GB size limit, so you might have to partition and format a part of your drive as FAT32 if your drive is larger than this size. Any Windows (or even Linux) partitioning utility should be able to do this.

You may also be interested in the answer to this question:

Will the Xbox 360 Slim wipe an external hard drive's memory in the formatting process?

Or, in this Microsoft Xbox 360 Help Article

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The MS help article hasn't been updated, but the storage limit was bumped to 32GB in a recent dashboard update. – agent86 Nov 21 '12 at 14:23
There was an announcement today that they're changing this somewhat - I believe you'll be able to have a single partition with game data + your own data, although there aren't any details yet... – agent86 Apr 9 '15 at 15:12

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