diff --git a/org.eclipse.lsp4e.test/src/org/eclipse/lsp4e/test/documentLink/DocumentLinkTest.java b/org.eclipse.lsp4e.test/src/org/eclipse/lsp4e/test/documentLink/DocumentLinkTest.java
index be717bda9..2aeefe50e 100644
--- a/org.eclipse.lsp4e.test/src/org/eclipse/lsp4e/test/documentLink/DocumentLinkTest.java
+++ b/org.eclipse.lsp4e.test/src/org/eclipse/lsp4e/test/documentLink/DocumentLinkTest.java
@@ -16,6 +16,7 @@
 
 import java.io.File;
 import java.util.ArrayList;
+import java.util.List;
 
 import org.eclipse.core.filesystem.EFS;
 import org.eclipse.core.resources.IFile;
@@ -78,10 +79,8 @@ public void testDocumentLinkExternalFile() throws Exception {
 		assertEquals("file://test0", hyperlinks[0].getHyperlinkText());
 	}
 
-	@Test
-	public void testDocumentLinkWithEncodedUri() throws Exception {
-		final var links = new ArrayList<DocumentLink>();
-		links.add(new DocumentLink(new Range(new Position(0, 9), new Position(0, 15)), "file:///tmp/fi%C3%A9le.ts"));
+	private void assertDocumentLinkWithEncodedUri(String encoded, String decoded) throws Exception{
+		final var links = List.of(new DocumentLink(new Range(new Position(0, 9), new Position(0, 15)), encoded));
 		MockLanguageServer.INSTANCE.setDocumentLinks(links);
 
 		IFile file = TestUtils.createUniqueTestFile(project, "not_link <link>");
@@ -89,9 +88,18 @@ public void testDocumentLinkWithEncodedUri() throws Exception {
 
 		IHyperlink[] hyperlinks = documentLinkDetector.detectHyperlinks(viewer, new Region(13, 0), true);
 		assertEquals(1, hyperlinks.length);
-		assertEquals("/tmp/fiéle.ts", hyperlinks[0].getHyperlinkText());
+		assertEquals(decoded, hyperlinks[0].getHyperlinkText());
+	}
+	@Test
+	public void testDocumentLinkWithFileEncodedUri() throws Exception {
+		assertDocumentLinkWithEncodedUri("file:///tmp/fi%C3%A9le.ts", "/tmp/fiéle.ts");
 	}
 
+	@Test
+	public void testDocumentLinkWithEncodedUri() throws Exception {
+		assertDocumentLinkWithEncodedUri("http://abc.com/fi%C3%A9le.html", "http://abc.com/fiéle.html");
+	}
+	
 	@Test
 	public void testDocumentLinkWrongRegion() throws Exception {
 		final var links = new ArrayList<DocumentLink>();
diff --git a/org.eclipse.lsp4e/src/org/eclipse/lsp4e/operations/documentLink/DocumentLinkDetector.java b/org.eclipse.lsp4e/src/org/eclipse/lsp4e/operations/documentLink/DocumentLinkDetector.java
index f4e501da2..a06bba0f1 100644
--- a/org.eclipse.lsp4e/src/org/eclipse/lsp4e/operations/documentLink/DocumentLinkDetector.java
+++ b/org.eclipse.lsp4e/src/org/eclipse/lsp4e/operations/documentLink/DocumentLinkDetector.java
@@ -13,6 +13,8 @@
 package org.eclipse.lsp4e.operations.documentLink;
 
 import java.net.URI;
+import java.net.URLDecoder;
+import java.nio.charset.StandardCharsets;
 import java.util.List;
 import java.util.Objects;
 import java.util.concurrent.ExecutionException;
@@ -81,6 +83,8 @@ private static String toLabel(final String uri) {
 				} catch (final IllegalArgumentException ex) {
 					LanguageServerPlugin.logError(ex);
 				}
+			} else {
+				return URLDecoder.decode(uri, StandardCharsets.UTF_8);
 			}
 			return uri;
 		}