MotivationThe size of a genome graph—the space required to store the nodes, node labels and edges—affects the efficiency of operations performed on it. For example, the time complexity to align a sequence to a graph without a graph index depends on the total number of characters in the node labels and the number of edges in the graph. This raises the need for approaches to construct space-efficient genome graphs.ResultsWe point out similarities in the string encoding mechanisms of genome graphs and the external pointer macro (EPM) compression model. We present a pair of linear-time algorithms that transform between genome graphs and EPM-compressed forms. The algorithms result in an upper bound on the size of the genome graph constructed in terms of an optimal EPM compression. To further reduce the size of the genome graph, we propose the source assignment problem that optimizes over the equivalent choices during compression and introduce an ILP formulation that solves that problem optimally. As a proof-of-concept, we introduce RLZ-Graph, a genome graph constructed based on the relative Lempel–Ziv algorithm. Using RLZ-Graph, across all human chromosomes, we are able to reduce the disk space to store a genome graph on average by 40.7% compared to colored compacted de Bruijn graphs constructed by Bifrost under the default settings. The RLZ-Graph scales well in terms of running time and graph sizes with an increasing number of human genome sequences compared to Bifrost and variation graphs produced by VGtoolkit.AvailabilityThe RLZ-Graph software is available at: https://github.com/Kingsford-Group/rlzgraph.Supplementary information Supplementary data are available at Bioinformatics online.