When we attempt to a publish image we encounter the below error on the ELM console:

A failure occurred while publishing the Layered Image: An error occurred while compositing the layer or image. Please check the available disk space on the local storage or the size of the target image.

Assigning more disk space to OS layer than the disk space assigned to published image resolves the issue.
 
PLEASE NOTE: https://support.citrix.com/article/CTX237940 supersedes this solution.

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Problem Cause

Issue may not have to do with the disk space necessarily.
The error occurs when more space is allocated to Published image than the OS image.
The error appears when ELM thinks that it is out of space in NTFS.

While Publishing a New image an error appears: Error - A failure occurred while publishing the Layered Image: An error occurred while compositing the layer or image. Please check the available disk space on the local storage or the size of the target image.