diff --git a/packages/foam-vscode/src/core/janitor/generate-link-references.test.ts b/packages/foam-vscode/src/core/janitor/generate-link-references.test.ts
index 902cae5c9..708f4be4c 100644
--- a/packages/foam-vscode/src/core/janitor/generate-link-references.test.ts
+++ b/packages/foam-vscode/src/core/janitor/generate-link-references.test.ts
@@ -135,13 +135,13 @@ describe('generateLinkReferences', () => {
     expect(actual).toEqual(expected);
   });
 
-  it('should encode spaces links', async () => {
+  it('should put links with spaces in angel brackets', async () => {
     const note = findBySlug('angel-reference');
     const expected = {
       newText: textForNote(
         `
 [//begin]: # "Autogenerated link references for markdown compatibility"
-[Note being referred as angel]: Note%20being%20referred%20as%20angel "Note being referred as angel"
+[Note being referred as angel]: <Note being referred as angel> "Note being referred as angel"
 [//end]: # "Autogenerated link references"`
       ),
       range: Range.create(3, 0, 3, 0),
diff --git a/packages/foam-vscode/src/core/services/markdown-provider.ts b/packages/foam-vscode/src/core/services/markdown-provider.ts
index 55769fb1d..fd9d946a0 100644
--- a/packages/foam-vscode/src/core/services/markdown-provider.ts
+++ b/packages/foam-vscode/src/core/services/markdown-provider.ts
@@ -137,6 +137,12 @@ export function createMarkdownReferences(
         relativeUri = relativeUri.changeExtension('*', '');
       }
 
+      // Extract base path and link name separately.
+      const basePath = relativeUri.path.split('/').slice(0, -1).join('/');
+      const linkName = relativeUri.path.split('/').pop();
+
+      const encodedURL = encodeURIComponent(linkName).replace(/%20/g, ' ');
+
       // [wikilink-text]: path/to/file.md "Page title"
       return {
         // embedded looks like ![[note-a]]
@@ -145,7 +151,7 @@ export function createMarkdownReferences(
           link.isEmbed ? 3 : 2,
           link.rawText.length - 2
         ),
-        url: encodeURIComponent(relativeUri.path),
+        url: `${basePath ? basePath + '/' : ''}${encodedURL}`,
         title: target.title,
       };
     })