diff --git a/bundles/com.salesforce.bazel.eclipse.core/src/com/salesforce/bazel/eclipse/core/model/discovery/JavaAspectsInfo.java b/bundles/com.salesforce.bazel.eclipse.core/src/com/salesforce/bazel/eclipse/core/model/discovery/JavaAspectsInfo.java
index 569bb8c3..40967560 100644
--- a/bundles/com.salesforce.bazel.eclipse.core/src/com/salesforce/bazel/eclipse/core/model/discovery/JavaAspectsInfo.java
+++ b/bundles/com.salesforce.bazel.eclipse.core/src/com/salesforce/bazel/eclipse/core/model/discovery/JavaAspectsInfo.java
@@ -20,6 +20,8 @@
 import static org.eclipse.core.runtime.IPath.fromPath;
 
 import java.io.IOException;
+import java.io.UnsupportedEncodingException;
+import java.net.URLDecoder;
 import java.util.ArrayList;
 import java.util.HashMap;
 import java.util.List;
@@ -74,6 +76,30 @@ static boolean isJavaProtoTarget(TargetIdeInfo target) {
                         || target.getKind().equals(GenericBlazeRules.RuleTypes.PROTO_LIBRARY.getKind()));
     }
 
+    /**
+     * Sanitizes a file path for use in a Bazel label by URL-decoding any percent-encoded characters. This is needed
+     * because external repository paths may contain URL-encoded characters (e.g., %40 for @) which are not valid in
+     * Bazel target names.
+     * 
+     * @param path
+     *            the potentially URL-encoded path
+     * @return the decoded path safe for use in a Bazel label
+     */
+    private static String sanitizePathForLabel(String path) {
+        try {
+            // Decode URL-encoded characters (e.g., %40 -> @, %2F -> /)
+            return URLDecoder.decode(path, "UTF-8");
+        } catch (UnsupportedEncodingException e) {
+            // UTF-8 is always supported, but handle the exception just in case
+            LOG.warn("Failed to URL-decode path '{}', using original path", path, e);
+            return path;
+        } catch (IllegalArgumentException e) {
+            // Handle invalid escape sequences
+            LOG.warn("Path '{}' contains invalid URL encoding, using original path", path, e);
+            return path;
+        }
+    }
+
     final ParsedBepOutput aspectsBuildResult;
     final IntellijAspects intellijAspects;
 
@@ -168,7 +194,7 @@ public JavaAspectsInfo(ParsedBepOutput aspectsBuildResult, BazelWorkspace bazelW
                                 "Unable to compute target label for runtime jar '{}'. Please check if the rule producing the jar is adding the Target-Label to the jar manifest!",
                                 classJar);
                         }
-                        targetLabel = Label.create(format("@_unknown_jar_//:%s", classJar.getRelativePath()));
+                        targetLabel = Label.create(format("@_unknown_jar_//:%s", sanitizePathForLabel(classJar.getRelativePath())));
                     } else if (!targetLabel.isExternal()
                             && !bazelWorkspace.getBazelPackage(new BazelLabel(targetLabel)).exists()) {
                         // possibly an external jar produced within an external repo
@@ -179,7 +205,7 @@ public JavaAspectsInfo(ParsedBepOutput aspectsBuildResult, BazelWorkspace bazelW
                                 targetLabel,
                                 classJar);
                         }
-                        targetLabel = Label.create(format("@_unknown_jar_//:%s", classJar.getRelativePath()));
+                        targetLabel = Label.create(format("@_unknown_jar_//:%s", sanitizePathForLabel(classJar.getRelativePath())));
                     }
 
                     var builder = LibraryArtifact.builder();