macOS virtual machines on Mac computers with Apple M1 Chip
In contrast to the macOS virtual machines created to run on Mac computers with Intel processors, macOS virtual machines on Mac computers with Apple M1 chips (macOS ARM VMs) are built using Apple's Virtualization framework, and all the virtual machines' components are managed by the framework.
macOS ARM VM bundle has .macvm extension instead of .pvm that macOS virtual machines for Mac computers with Intel processors have. You can learn more about Parallels Desktop for Mac with Apple M1 chips in KB 125343.
Known limitations of macOS ARM VMs
The Virtualization framework is in its early stages, and as a result, it does not yet enable many features that exist in macOS virtual machines for Mac computers with Intel processors. However, Parallels is working closely with Apple to expand the functionality of macOS ARM VMs.
Here is a list of key features that are either not supported or not fully supported in macOS ARM VMs.
Suspend and Resume: Not supported yet.
Configuration: There is currently no interface to adjust macOS ARM VM configuration. However, the configuration can be adjusted manually, as described in KB 128842. Please note that available options are rather limited. I.e., it's not possible to change things like UUID, MAC address etc.
Snapshots: Not supported yet.
Shared folders: File sharing between the main system and a macOS ARM VM is not supported. This includes consequential features such as drag-and-drop. However, you can share files between the virtual machine and the Mac using the native macOS file sharing feature.
Virtual Wi-Fi adapter: Similarly to Windows virtual machines, there is no virtual Wi-Fi adapter in macOS ARM VMs. Your Mac internet connection (wired or wireless) is accessed by the virtual machine through a virtual Ethernet connection.
USB devices: It is currently not possible to connect any USB device to a macOS ARM VM yet.
Disk size: macOS ARM VM's disk size is 60 GB by default. It can be set to a different value during the manual installation process (see KB 125561), but once the virtual machine is created, disk size cannot be changed.
Mac built-in devices: A macOS ARM VM has only access to the main system's mouse and keyboard (or rather their inputs), and other devices such as DVD drives and webcams are not accessible to in macOS ARM VM.
Startup options/recovery mode: It is currently not possible to access startup options in a macOS ARM VM, and as a result — access many options that it provide such as recovery mode, safe mode etc.
Command-line interface and SDK: A macOS ARM VM cannot be accessed through Parallels' prlctl and prlsrvctl command-line tools or through Parallels SDK. And there is no Vagrant support.
Apple ID: It is currently not possible to sign in with your Apple ID in a macOS ARM VM.
Compatibility with 3rd party applications: As mentioned above, all the components of a macOS ARM VM are managed by the Apple's virtualization framework. Therefore, if you experience any 3rd party compatibility issues in a macOS ARM VM, please report them to Apple Support.
For steps on installing a macOS ARM VM, please refer to KB 125561.