We complete the reformulation of the holographic correspondence as a highly efficient renormalization group (RG) flow that can also determine the UV data in the field theory in the strong-coupling and large-N limit. We introduce a special way to define operators at any given scale in terms of appropriate coarse-grained collective variables, without requiring the use of the elementary fields. The Wilsonian construction is generalized by promoting the cutoff to a functional of these collective variables. We impose three criteria to determine the coarse-graining. The first criterion is that the effective Ward identities for local conservation of energy, momentum, etc. should preserve their standard forms, but in new scale-dependent background metric and sources which are functionals of the effective single-trace operators. The second criterion is that the scale-evolution equations of the operators in the actual background metric should be state-independent, implying that the collective variables should not explicitly appear in them. The final required criterion is that the end point of the scale-evolution of the RG flow can be transformed to a fixed point corresponding to familiar nonrelativistic equations with a finite number of parameters, such as incompressible nonrelativistic Navier-Stokes, under a certain universal rescaling of the scale and of the time coordinate. Using previous work, we explicitly show that in the hydrodynamic limit each such highly efficient RG flow reproduces a unique classical gravity theory with precise UV data that satisfy our IR criterion and also lead to regular horizons in the dual geometries. We obtain the explicit coarse-graining which reproduces Einstein’s equations. In a simple example, we are also able to construct a low-energy effective action and compute the beta function. Finally, we show how our construction can be interpolated with the traditional Wilsonian RG flow at a suitable scale and can be used to develop new nonperturbative frameworks for QCD-like theories.