diff --git a/Cargo.lock b/Cargo.lock
index a97219e06..6868f1553 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -4885,6 +4885,7 @@ dependencies = [
  "open",
  "ordered-float",
  "palette",
+ "percent-encoding",
  "portable-pty",
  "pretty_env_logger",
  "promise",
@@ -4972,6 +4973,7 @@ dependencies = [
  "lazy_static",
  "log",
  "mux",
+ "percent-encoding",
  "portable-pty",
  "promise",
  "rangeset",
diff --git a/wezterm-gui/Cargo.toml b/wezterm-gui/Cargo.toml
index 211d918cb..f1557badc 100644
--- a/wezterm-gui/Cargo.toml
+++ b/wezterm-gui/Cargo.toml
@@ -40,6 +40,7 @@ mux = { path = "../mux" }
 open = "1.4"
 ordered-float = "2.1"
 palette = "0.5"
+percent-encoding = "2"
 portable-pty = { path = "../pty", features = ["serde_support", "ssh"]}
 promise = { path = "../promise" }
 pulldown-cmark = "0.8"
diff --git a/wezterm-gui/src/termwindow/spawn.rs b/wezterm-gui/src/termwindow/spawn.rs
index 1307ec149..42861f058 100644
--- a/wezterm-gui/src/termwindow/spawn.rs
+++ b/wezterm-gui/src/termwindow/spawn.rs
@@ -5,6 +5,7 @@ use mux::activity::Activity;
 use mux::domain::DomainState;
 use mux::tab::SplitDirection;
 use mux::Mux;
+use percent_encoding::percent_decode_str;
 use portable_pty::{CommandBuilder, PtySize};
 use std::sync::Arc;
 
@@ -127,15 +128,19 @@ impl super::TermWindow {
         } else {
             match cwd {
                 Some(url) if url.scheme() == "file" => {
-                    let path = url.path().to_string();
-                    // On Windows the file URI can produce a path like:
-                    // `/C:\Users` which is valid in a file URI, but the leading slash
-                    // is not liked by the windows file APIs, so we strip it off here.
-                    let bytes = path.as_bytes();
-                    if bytes.len() > 2 && bytes[0] == b'/' && bytes[2] == b':' {
-                        Some(path[1..].to_owned())
+                    if let Ok(path) = percent_decode_str(url.path()).decode_utf8() {
+                        let path = path.into_owned();
+                        // On Windows the file URI can produce a path like:
+                        // `/C:\Users` which is valid in a file URI, but the leading slash
+                        // is not liked by the windows file APIs, so we strip it off here.
+                        let bytes = path.as_bytes();
+                        if bytes.len() > 2 && bytes[0] == b'/' && bytes[2] == b':' {
+                            Some(path[1..].to_owned())
+                        } else {
+                            Some(path)
+                        }
                     } else {
-                        Some(path)
+                        None
                     }
                 }
                 Some(_) | None => None,
diff --git a/wezterm-mux-server-impl/Cargo.toml b/wezterm-mux-server-impl/Cargo.toml
index c0a6cb424..f892ae77f 100644
--- a/wezterm-mux-server-impl/Cargo.toml
+++ b/wezterm-mux-server-impl/Cargo.toml
@@ -16,6 +16,7 @@ hostname = "0.3"
 lazy_static = "1.4"
 log = "0.4"
 mux = { path = "../mux" }
+percent-encoding = "2"
 portable-pty = { path = "../pty", features = ["serde_support"]}
 promise = { path = "../promise" }
 rangeset = { path = "../rangeset" }
diff --git a/wezterm-mux-server-impl/src/sessionhandler.rs b/wezterm-mux-server-impl/src/sessionhandler.rs
index 511a79030..9cd458b20 100644
--- a/wezterm-mux-server-impl/src/sessionhandler.rs
+++ b/wezterm-mux-server-impl/src/sessionhandler.rs
@@ -6,6 +6,7 @@ use mux::pane::{Pane, PaneId};
 use mux::renderable::{RenderableDimensions, StableCursorPosition};
 use mux::tab::TabId;
 use mux::Mux;
+use percent_encoding::percent_decode_str;
 use portable_pty::PtySize;
 use promise::spawn::spawn_into_main_thread;
 use rangeset::RangeSet;
@@ -611,8 +612,13 @@ async fn split_pane(split: SplitPane, sender: PduSender) -> anyhow::Result<Pdu>
     let cwd = split.command_dir.or_else(|| {
         mux.get_pane(pane_id)
             .and_then(|pane| pane.get_current_working_dir())
-            .map(|url| {
-                let path = url.path().to_string();
+            .and_then(|url| {
+                percent_decode_str(url.path())
+                    .decode_utf8()
+                    .ok()
+                    .map(|path| path.into_owned())
+            })
+            .map(|path| {
                 // On Windows the file URI can produce a path like:
                 // `/C:\Users` which is valid in a file URI, but the leading slash
                 // is not liked by the windows file APIs, so we strip it off here.