How can I change the location of docker images when using Docker Desktop on WSL2 with Windows 10 Home?

The WSL 2 docker-desktop-data vm disk image would normally reside in: %USERPROFILE%\AppData\Local\Docker\wsl\data\ext4.vhdx

Follow the following to relocate it to other drive/directory, with all existing docker data preserved (tested against Docker Desktop 2.3.0.4 (46911), and continued to work after updating the 3.1.0 (51484)):

First, shut down your docker desktop by right click on the Docker Desktop icon and select Quit Docker Desktop

Then, open your command prompt:

wsl --list -v

You should be able to see, make sure the STATE for both is Stopped.

  NAME                   STATE           VERSION
* docker-desktop         Stopped         2
  docker-desktop-data    Stopped         2

Export docker-desktop-data into a file

wsl --export docker-desktop-data "D:\Docker\wsl\data\docker-desktop-data.tar"

Unregister docker-desktop-data from wsl, note that after this, your ext4.vhdx file would automatically be removed (so back it up first if you have important existing image/container):

wsl --unregister docker-desktop-data

Import the docker-desktop-data back to wsl, but now the ext4.vhdx would reside in different drive/directory:

wsl --import docker-desktop-data "D:\Docker\wsl\data" "D:\Docker\wsl\data\docker-desktop-data.tar" --version 2

Start the Docker Desktop again and it should work

You may delete the D:\Docker\wsl\data\docker-desktop-data.tar file (NOT the ext4.vhdx file) if everything looks good for you after verifying

Edit: re-register docker-desktop would set the default docker-data to C drive now, so we should only unregister docker-data as the accepted answer.

You can do

 wsl --unregister docker-desktop-data

 wsl --import docker-desktop-data D:\wsl\docker-desktop-data "C:\Program Files\Docker\Docker\resources\wsl\wsl-data.tar" --version=2

The tar file is the file used to install, and before it is your new destination.

This always work while the move-wsl or lxrunoffline didn't work for me on fast rings. And sometimes you have to unistall/install docker first

I found this tool from pxlrbt on github. It's using standard wsl import/export and pretty safe. Just moved both my docker-desktop-data distro to a different drive and it works well.