diff --git a/Cargo.lock b/Cargo.lock
index 9b8584c04..008b8a060 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -4054,6 +4054,12 @@ dependencies = [
  "serde",
 ]
 
+[[package]]
+name = "urlencoding"
+version = "2.1.3"
+source = "registry+https://github.com/rust-lang/crates.io-index"
+checksum = "daf8dba3b7eb870caf1ddeed7bc9d2a049f3cfdfae7cb521b087cc33ae4c49da"
+
 [[package]]
 name = "usvg"
 version = "0.29.0"
@@ -4409,6 +4415,7 @@ dependencies = [
  "junction",
  "tempfile",
  "tracing",
+ "urlencoding",
  "uv-warnings",
 ]
 
diff --git a/Cargo.toml b/Cargo.toml
index 8579673c5..a3ad53a02 100644
--- a/Cargo.toml
+++ b/Cargo.toml
@@ -105,6 +105,7 @@ tracing-tree = { version = "0.3.0" }
 unicode-width = { version = "0.1.11" }
 unscanny = { version = "0.1.0" }
 url = { version = "2.5.0" }
+urlencoding = { version = "2.1.3" }
 uuid = { version = "1.7.0", default-features = false }
 walkdir = { version = "2.4.0" }
 which = { version = "6.0.0" }
diff --git a/crates/uv-fs/Cargo.toml b/crates/uv-fs/Cargo.toml
index af3cf42ec..5af8bd625 100644
--- a/crates/uv-fs/Cargo.toml
+++ b/crates/uv-fs/Cargo.toml
@@ -21,6 +21,7 @@ fs2 = { workspace = true }
 junction = { workspace = true }
 tempfile = { workspace = true }
 tracing = { workspace = true }
+urlencoding = { workspace = true }
 
 [features]
 default = []
diff --git a/crates/uv-fs/src/path.rs b/crates/uv-fs/src/path.rs
index 696055fc8..14ef90b0a 100644
--- a/crates/uv-fs/src/path.rs
+++ b/crates/uv-fs/src/path.rs
@@ -31,14 +31,18 @@ impl<T: AsRef<Path>> Normalized for T {
 ///
 /// On other platforms, this is a no-op.
 pub fn normalize_url_path(path: &str) -> Cow<'_, str> {
+    // Apply percent-decoding to the URL.
+    let path = urlencoding::decode(path).unwrap_or(Cow::Borrowed(path));
+
+    // Return the path.
     if cfg!(windows) {
         Cow::Owned(
             path.strip_prefix('/')
-                .unwrap_or(path)
+                .unwrap_or(&path)
                 .replace('/', std::path::MAIN_SEPARATOR_STR),
         )
     } else {
-        Cow::Borrowed(path)
+        path
     }
 }
 
@@ -71,5 +75,17 @@ mod tests {
                 "./ferris/wheel-0.42.0.tar.gz"
             );
         }
+
+        if cfg!(windows) {
+            assert_eq!(
+                normalize_url_path("./wheel%20cache/wheel-0.42.0.tar.gz"),
+                ".\\wheel cache\\wheel-0.42.0.tar.gz"
+            );
+        } else {
+            assert_eq!(
+                normalize_url_path("./wheel%20cache/wheel-0.42.0.tar.gz"),
+                "./wheel cache/wheel-0.42.0.tar.gz"
+            );
+        }
     }
 }