diff --git a/Cargo.lock b/Cargo.lock
index 238710b4b0f..382d4755dcf 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -2446,6 +2446,7 @@ dependencies = [
  "noq",
  "noq-proto",
  "num_enum",
+ "percent-encoding",
  "pin-project",
  "postcard",
  "proptest",
diff --git a/iroh-relay/Cargo.toml b/iroh-relay/Cargo.toml
index 559c2ade51a..81bbcf14876 100644
--- a/iroh-relay/Cargo.toml
+++ b/iroh-relay/Cargo.toml
@@ -40,6 +40,7 @@ lru = "0.18.3"
 n0-error = "1.0.0"
 n0-future = "0.3"
 num_enum = "0.7"
+percent-encoding = "2.3"
 pin-project = "1"
 postcard = { version = "1", default-features = false, features = [
     "alloc",
diff --git a/iroh-relay/src/client/tls.rs b/iroh-relay/src/client/tls.rs
index 2787d9ac440..5403519e43f 100644
--- a/iroh-relay/src/client/tls.rs
+++ b/iroh-relay/src/client/tls.rs
@@ -9,7 +9,7 @@
 use std::{collections::VecDeque, net::IpAddr};
 
 use bytes::Bytes;
-use data_encoding::BASE64URL;
+use data_encoding::BASE64;
 use http_body_util::Empty;
 use hyper::{Request, upgrade::Parts};
 use hyper_util::rt::TokioIo;
@@ -18,6 +18,7 @@ use n0_future::{
     FuturesUnordered, MaybeFuture, StreamExt, task,
     time::{self},
 };
+use percent_encoding::percent_decode_str;
 use rustls::client::Resumption;
 use tokio::net::TcpStream;
 use tracing::{Instrument, error, info_span};
@@ -180,12 +181,11 @@ impl MaybeTlsStreamBuilder {
                 "setting proxy-authorization: username={}",
                 proxy_url.username()
             );
-            let to_encode = format!(
-                "{}:{}",
-                proxy_url.username(),
-                proxy_url.password().unwrap_or_default()
-            );
-            let encoded = BASE64URL.encode(to_encode.as_bytes());
+            // `Url` keeps the username and password percent-encoded.
+            let mut to_encode: Vec<u8> = percent_decode_str(proxy_url.username()).collect();
+            to_encode.push(b':');
+            to_encode.extend(percent_decode_str(proxy_url.password().unwrap_or_default()));
+            let encoded = BASE64.encode(&to_encode);
             req_builder = req_builder.header("Proxy-Authorization", format!("Basic {encoded}"));
         }
         let req = req_builder
@@ -447,4 +447,78 @@ mod tests {
             .expect_err("no addresses to dial");
         assert!(matches!(err, DialError::Dns { .. }));
     }
+
+    /// Dials through a fake proxy with the given userinfo and returns the
+    /// `Proxy-Authorization` header the proxy received.
+    ///
+    /// The proxy reads the `CONNECT` request and hangs up, so the dial fails.
+    #[cfg(with_crypto_provider)]
+    async fn proxy_authorization_for(userinfo: &str) -> String {
+        use std::time::Duration;
+
+        use tokio::io::AsyncReadExt;
+
+        let listener = TcpListener::bind((Ipv4Addr::LOCALHOST, 0)).await.unwrap();
+        let port = listener.local_addr().unwrap().port();
+        let proxy = task::spawn(async move {
+            let (mut stream, _) = listener.accept().await.unwrap();
+            let mut head = Vec::new();
+            while !head.ends_with(b"\r\n\r\n") {
+                head.push(stream.read_u8().await.unwrap());
+            }
+            String::from_utf8(head).unwrap()
+        });
+
+        let proxy_url = format!("http://{userinfo}@proxy.test:{port}")
+            .parse()
+            .expect("valid url");
+        let resolver = static_resolver(vec![Ipv4Addr::LOCALHOST], vec![]);
+        let res = MaybeTlsStreamBuilder::new(
+            relay_url(443),
+            resolver,
+            crate::tls::make_dangerous_client_config(),
+        )
+        .proxy_url(Some(proxy_url))
+        .connect()
+        .await;
+        assert!(res.is_err(), "the proxy never opens the tunnel");
+
+        let head = time::timeout(Duration::from_secs(5), proxy)
+            .await
+            .expect("the proxy received no request")
+            .unwrap();
+        head.lines()
+            .find_map(|line| {
+                let (name, value) = line.split_once(':')?;
+                name.eq_ignore_ascii_case("proxy-authorization")
+                    .then(|| value.trim().to_string())
+            })
+            .expect("no Proxy-Authorization header")
+    }
+
+    /// Tests that the proxy credentials use the standard base64 alphabet (RFC 7617).
+    #[cfg(with_crypto_provider)]
+    #[tokio::test]
+    async fn proxy_authorization_uses_standard_base64() {
+        // The URL-safe alphabet gives "dXNlcjpzM2NyZXR-fg==".
+        assert_eq!(
+            proxy_authorization_for("user:s3cret~~").await,
+            "Basic dXNlcjpzM2NyZXR+fg=="
+        );
+    }
+
+    /// Tests that the proxy credentials are percent-decoded before they are encoded.
+    #[cfg(with_crypto_provider)]
+    #[tokio::test]
+    async fn proxy_authorization_decodes_credentials() {
+        // `Url` keeps these passwords as "s3cret%3E%3E" and "p%40ss".
+        assert_eq!(
+            proxy_authorization_for("user:s3cret>>").await,
+            "Basic dXNlcjpzM2NyZXQ+Pg=="
+        );
+        assert_eq!(
+            proxy_authorization_for("user:p%40ss").await,
+            "Basic dXNlcjpwQHNz"
+        );
+    }
 }