There are two ways to reset your Xbox one. Generally, we perform a reset on Xbox One when we wish to remove all its data. As a result, it will be like a new console, which does not contain any data or account registered to it. The factory reset is recommended only when you are planning to sell your Xbox One console. There is also another option in Xbox One reset, where you can perform a reset while retaining the games and apps installed.
This option will only affect the operating system but not the personal data. It is more applicable during software glitches on your console. Before attempting a reset where all your data will be removed, one can always try this option. Because a factory reset will delete all your data on the Xbox One, and you will not be able to recover it. After a factory reset, you have to sign in to your account and re-download the purchased games/apps once again.
How to Factory Reset Xbox One
This is the final option to try when you are resetting due to software glitches. However, if you need a factory reset for a reason other than faults on the device, then do it directly.
 Turn on your Xbox One and press the Home button from your controller.
 Open the Settings menu and then select the System option.
 Now, choose Console Info.
 Click on the Reset Console option.
 On the next screen, you will have three options to choose from Reset and remove everything, Reset and keep my games & apps, and Cancel.
 Choose either Reset and remove everything or Reset and keep my games & apps, based on your preference.
The reset process will take a few minutes, and your Xbox One console will restart after that. If you wish to keep your personal information and data, you can manually transfer them before initiating the factory reset. Visit Xbox support for more help, or contact the Xbox representative to guide you.
Related: How to Restart Xbox One
Reset Xbox One using a USB Flash Drive
All you need to reset using this option is a Windows-based PC and USB flash drive formatted as NTFS. Make sure you don’t have any other files on the USB flash drive before attempting a reset.
 Plugin the USB flash drive to your PC.
 Click the Xbox One Reset link and download the compressed file.
 Save the reset file as a console update.postcode on your PC.
 Extract the saved file and copy the reset file as $SystemUpdate to the root directory of the USB flash drive.
 Next, turn off your Xbox One and unplug it from the main power source. Make sure it is completely turned off.
 Similarly, remove the network cable from your Xbox One if you are using one.
 Plugin the Xbox One again to the power outlet after 30 seconds.
 Insert the USB flash drive into the USB port of your Xbox One.
 Press and hold the Pair button and Eject button. Now simultaneously press the Xbox button on the console.
 Release the Xbox button after a single press, but continue holding the Pair and Eject button on your console for 10 to 15 seconds.
 You will hear two power-up tones after the long press. Release the Pair and Eject button only after the two power-up tones.
 Your Xbox One will restart, and now you need to connect your console to the internet. Finally, you can remove the USB flash drive from the console.
Frequently Asked Questions
Under the reset console option, you have an option to choose between Reset and remove everything and Reset and keep your games & apps. Select Reset and keep my games & apps option to retain the games during a factory reset.
You can try the factory reset option when you agree to remove all your data and settings on your console. This is your choice when you wish to sell or offer your console to someone. Try the hard reset or soft reset for other OS-related issues on your console.
No, it is not a harmful choice for your Xbox One console. In fact, it is one of the suggested solutions to rectify some performance errors on your device. But make sure that your data will be removed when you factory reset it before attempting it.