diff --git a/src/etc/testcases/core/antclassloader.xml b/src/etc/testcases/core/antclassloader.xml
index 33da48d90..8d8d8f24a 100644
--- a/src/etc/testcases/core/antclassloader.xml
+++ b/src/etc/testcases/core/antclassloader.xml
@@ -1,13 +1,18 @@
 <project name="antclassloader-test" basedir=".">
 
     <property name="tmp.dir" location="tmp space"/>
+    <!-- ant for germans -->
+    <property name="tmp.dir.nonascii" value="&#0227;nt"/>
     <property name="ext.dir.relative" value="ext"/>
     <property name="main.jar" location="${tmp.dir}/main.jar"/>
     <property name="ext.jar.relative" value="${ext.dir.relative}/ext.jar"/>
     <property name="ext.jar" location="${tmp.dir}/${ext.jar.relative}"/>
     <property name="build.sysclasspath" value="first"/>
+    <property name="main.jar.nonascii" location="${tmp.dir.nonascii}/main.jar"/>
+    <property name="ext.jar.nonascii" location="${tmp.dir.nonascii}/${ext.jar.relative}"/>
+    <target name="setup" depends="setup.withspace,setup.nonascii"/>
 
-    <target name="setup">
+    <target name="setup.withspace">
         <mkdir dir="${tmp.dir}/${ext.dir.relative}"/>
         <jar destfile="${main.jar}" whenempty="create">
           <manifest>
@@ -16,10 +21,20 @@
         </jar>
         <jar destfile="${ext.jar}"/>
     </target>
+    <target name="setup.nonascii">
+      <mkdir dir="${tmp.dir.nonascii}/${ext.dir.relative}"/>
+      <jar destfile="${main.jar.nonascii}" whenempty="create">
+        <manifest>
+          <attribute name="Class-Path" value="${ext.jar.relative}"/>
+        </manifest>
+      </jar>
+      <jar destfile="${ext.jar.nonascii}"/>
 
+    </target>
 
     <target name="cleanup">
         <delete dir="${tmp.dir}" quiet="true"/>
+        <delete dir="${tmp.dir.nonascii}" quiet="true"/>
     </target>
 
 
diff --git a/src/main/org/apache/tools/ant/AntClassLoader.java b/src/main/org/apache/tools/ant/AntClassLoader.java
index ac3f6dffc..805b4f818 100644
--- a/src/main/org/apache/tools/ant/AntClassLoader.java
+++ b/src/main/org/apache/tools/ant/AntClassLoader.java
@@ -46,6 +46,7 @@ import org.apache.tools.ant.util.CollectionUtils;
 import org.apache.tools.ant.util.FileUtils;
 import org.apache.tools.ant.util.JavaEnvUtils;
 import org.apache.tools.ant.util.LoaderUtils;
+import org.apache.tools.ant.launch.Locator;
 
 /**
  * Used to load classes within ant with a different classpath from
@@ -500,14 +501,7 @@ public class AntClassLoader extends ClassLoader implements SubBuildListener {
                         + " loader", Project.MSG_VERBOSE);
                     continue;
                 }
-                String decodedPath = null;
-                // try catch block required because URLDecoder.decode throws
-                // exception on JDK 1.2
-                try {
-                    decodedPath = URLDecoder.decode(libraryURL.getFile());
-                } catch (Exception exc) {
-                    throw new BuildException(exc);
-                }
+                String decodedPath = Locator.decodeUri(libraryURL.getFile());
                 File libraryFile = new File(decodedPath);
                 if (libraryFile.exists() && !isInPath(libraryFile)) {
                     addPathFile(libraryFile);
diff --git a/src/main/org/apache/tools/ant/launch/Locator.java b/src/main/org/apache/tools/ant/launch/Locator.java
index fca675d9a..071b844c4 100644
--- a/src/main/org/apache/tools/ant/launch/Locator.java
+++ b/src/main/org/apache/tools/ant/launch/Locator.java
@@ -21,6 +21,8 @@ import java.net.MalformedURLException;
 import java.net.URL;
 import java.io.File;
 import java.io.FilenameFilter;
+import java.io.ByteArrayOutputStream;
+import java.io.UnsupportedEncodingException;
 import java.text.CharacterIterator;
 import java.text.StringCharacterIterator;
 import java.util.Locale;
@@ -32,6 +34,10 @@ import java.util.Locale;
  * @since Ant 1.6
  */
 public final class Locator {
+    /**
+     * encoding used to represent URIs
+     */
+    public static String URI_ENCODING = "UTF-8";
     /**
      * Not instantiable
      */
@@ -96,6 +102,10 @@ public final class Locator {
      * <p>Swallows '%' that are not followed by two characters,
      * doesn't deal with non-ASCII characters.</p>
      *
+     * @see <a href="http://www.w3.org/TR/xml11/#dt-sysid">dt-sysid</a>
+     * which makes some mention of how
+     * characters not supported by URI Reference syntax should be escaped.
+     *
      * @param uri the URI designating a file in the local filesystem.
      * @return the local file system path for the file.
      * @since Ant 1.6
@@ -124,21 +134,30 @@ public final class Locator {
             && Character.isLetter(uri.charAt(1)) && uri.lastIndexOf(':') > -1) {
             uri = uri.substring(1);
         }
-        String path = decodeUri(uri);
+        String path = null;
+        try {
+            path = decodeUri(uri);
+        } catch (UnsupportedEncodingException exc) {
+            // not sure whether this is clean, but this method is declared not to throw exceptions.
+            throw new IllegalStateException("Could not convert URI to path", exc);
+        }
         return path;
     }
 
     /**
      * Decodes an Uri with % characters.
+     * The URI is escaped
      * @param uri String with the uri possibly containing % characters.
      * @return The decoded Uri
+     * @throws UnsupportedEncodingException if UTF-8 is not available
+     * @since Ant 1.7
      */
-    private static String decodeUri(String uri) {
+    public static String decodeUri(String uri) throws UnsupportedEncodingException{
         if (uri.indexOf('%') == -1)
         {
             return uri;
         }
-        StringBuffer sb = new StringBuffer();
+        ByteArrayOutputStream sb = new ByteArrayOutputStream(uri.length());
         CharacterIterator iter = new StringCharacterIterator(uri);
         for (char c = iter.first(); c != CharacterIterator.DONE;
              c = iter.next()) {
@@ -149,14 +168,14 @@ public final class Locator {
                     char c2 = iter.next();
                     if (c2 != CharacterIterator.DONE) {
                         int i2 = Character.digit(c2, 16);
-                        sb.append((char) ((i1 << 4) + i2));
+                        sb.write((char) ((i1 << 4) + i2));
                     }
                 }
             } else {
-                sb.append(c);
+                sb.write(c);
             }
         }
-        String path = sb.toString();
+        String path = sb.toString("UTF-8");
         return path;
     }
 
diff --git a/src/main/org/apache/tools/ant/util/FileUtils.java b/src/main/org/apache/tools/ant/util/FileUtils.java
index e7e82f25f..897b5b3cf 100644
--- a/src/main/org/apache/tools/ant/util/FileUtils.java
+++ b/src/main/org/apache/tools/ant/util/FileUtils.java
@@ -1026,6 +1026,11 @@ public class FileUtils {
      * <p>This code encodes non ASCII characters too.</p>
      *
      * <p>The coding of the output is the same as what File.toURI().toASCIIString() produces</p>
+     *
+     * @see <a href="http://www.w3.org/TR/xml11/#dt-sysid">dt-sysid</a>
+     * which makes some mention of how
+     * characters not supported by URI Reference syntax should be escaped.
+     *
      * @param path the path in the local file system.
      * @return the URI version of the local path.
      * @since Ant 1.6
@@ -1067,7 +1072,7 @@ public class FileUtils {
             byte[] bytes = null;
             byte b;
             try {
-                bytes = path.substring(i).getBytes("UTF-8");
+                bytes = path.substring(i).getBytes(Locator.URI_ENCODING);
             } catch (java.io.UnsupportedEncodingException e) {
                 // should never happen
                 throw new BuildException(e);
diff --git a/src/testcases/org/apache/tools/ant/AntClassLoaderTest.java b/src/testcases/org/apache/tools/ant/AntClassLoaderTest.java
index d4036eeb8..a187ab907 100644
--- a/src/testcases/org/apache/tools/ant/AntClassLoaderTest.java
+++ b/src/testcases/org/apache/tools/ant/AntClassLoaderTest.java
@@ -53,6 +53,16 @@ public class AntClassLoaderTest extends BuildFileTest {
         String path = myLoader.getClasspath();
         assertEquals(mainjarstring + File.pathSeparator + extjarstring, path);
     }
+    public void testJarWithManifestInNonAsciiDir() {
+        String mainjarstring = getProject().getProperty("main.jar.nonascii");
+        String extjarstring = getProject().getProperty("ext.jar.nonascii");
+        Path myPath = new Path(getProject());
+        myPath.setLocation(new File(mainjarstring));
+        getProject().setUserProperty("build.sysclasspath","ignore");
+        AntClassLoader myLoader = getProject().createClassLoader(myPath);
+        String path = myLoader.getClasspath();
+        assertEquals(mainjarstring + File.pathSeparator + extjarstring, path);
+    }
     public void testCleanup() throws BuildException {
         Path path = new Path(p, ".");
         AntClassLoader loader = new AntClassLoader(p, path);