This paper proposes physical refactoring and digs into its process and methods. Physical refactoring is adisciplined technique for restructuring the physical structure of a software system, to improve the efficiency ofsoftware development, while preserving the system’s external behavior. It follows the best practices of refactoringto change the system in small and iterative steps, and applies refactorings according to the standards of physicaldesign. Case studies demonstrate that physical refactoring may continuously improve software quality from theviewpoint of the physical structure.