Is there an application similar to TrueCrypt, but the one that can make variable size containers opposed to fixed-size or only-growing-to-certain-amount containers which can be made by TrueCrypt?

I want this container to be able to be mounted to a drive/folder, and the size of the outer container not be much different from the total size of all the files that I put into the mounted folder, while still providing strong encryption.

If to put it in other words, I want a program like truecrypt, which not only automatically grows the container if I put in new files, but also decreases it's size if some files are deleted.

I know there are some issues of course, and it would not work 100% as truecrypt, because it basically works on the sector level of the disk, giving all the filesystem-control to the OS, and so when I remove a file, it might as well be left there, or there might be some fragmentation issues that would stop just truncating the volume from working, but perhaps a program can be built in some other way? Instead of providing sector-level interface, it would provide filesystem-level interface? A filesystem inside a file which would support shrinking when files are deleted?