diff --git a/changelogs/unreleased/unescape-relative-path.yml b/changelogs/unreleased/unescape-relative-path.yml
new file mode 100644
index 00000000000..755b0379a16
--- /dev/null
+++ b/changelogs/unreleased/unescape-relative-path.yml
@@ -0,0 +1,4 @@
+---
+title: Avoid escaping relative links in Markdown twice
+merge_request: 7940
+author: winniehell
diff --git a/lib/banzai/filter/relative_link_filter.rb b/lib/banzai/filter/relative_link_filter.rb
index f09d78be0ce..9e23c8f8c55 100644
--- a/lib/banzai/filter/relative_link_filter.rb
+++ b/lib/banzai/filter/relative_link_filter.rb
@@ -46,7 +46,7 @@ module Banzai
       end
 
       def rebuild_relative_uri(uri)
-        file_path = relative_file_path(uri.path)
+        file_path = relative_file_path(uri)
 
         uri.path = [
           relative_url_root,
@@ -59,8 +59,10 @@ module Banzai
         uri
       end
 
-      def relative_file_path(path)
-        nested_path = build_relative_path(path, context[:requested_path])
+      def relative_file_path(uri)
+        path = Addressable::URI.unescape(uri.path)
+        request_path = Addressable::URI.unescape(context[:requested_path])
+        nested_path = build_relative_path(path, request_path)
         file_exists?(nested_path) ? nested_path : path
       end
 
@@ -108,11 +110,7 @@ module Banzai
       end
 
       def uri_type(path)
-        @uri_types[path] ||= begin
-          unescaped_path = Addressable::URI.unescape(path)
-
-          current_commit.uri_type(unescaped_path)
-        end
+        @uri_types[path] ||= current_commit.uri_type(path)
       end
 
       def current_commit