A system for space-optimized backup set conversion may include a backup converter and a first sequence of backup images of a data source. Each backup image may be of a particular backup image type, such as a full image, a differential image, or an incremental image. The backup converter may be configured to convert the first sequence of backup images into a second sequence of backup images by converting a particular backup image of the first sequence into a transformed backup image of a different backup type. For example, a full image may be converted into either a differential image or an incremental image, and a differential image may be converted into an incremental image.