The new dashboard update has increased the limit from 16GB
The latest Xbox 360 dashboard update that appeared back in October has delivered a variety of impressive things, but one of the more hidden features has now been uncovered. This allows console owners to store up to 32GB of data onto memory sticks connected via the device's USB port, a massive increase over the 16GB that was previously available.The Xbox 360 shipped with a variety of built-in hard drives over the years, but Microsoft always offered a cheaper version without an HDD or with just 4GB of flash storage.
In order to supplement this, the company allowed customers to connect bigger USB sticks to the Xbox 360, but only let them use 16GB of that removable storage.
Now, thanks to the latest dashboard update, that limit has been increased to 32GB, meaning you can store way more data on any external drive, provided it's big enough.
According to a Microsoft representative who talked with Joystiq, this decision has been made because Xbox 360 owners consume a lot of content.