diff --git a/src/vs/base/common/uri.ts b/src/vs/base/common/uri.ts
index 55e43e6d1cb..d2fdb47ea2a 100644
--- a/src/vs/base/common/uri.ts
+++ b/src/vs/base/common/uri.ts
@@ -50,6 +50,27 @@ function _validateUri(ret: URI): void {
 	}
 }
 
+// implements a bit of https://tools.ietf.org/html/rfc3986#section-5
+function _referenceResolution(scheme: string, path: string): string {
+
+	// the slash-character is our 'default base' as we don't
+	// support constructing URIs relative to other URIs. This
+	// also means that we alter and potentially break paths.
+	// see https://tools.ietf.org/html/rfc3986#section-5.1.4
+	switch (scheme) {
+		case 'https':
+		case 'http':
+		case 'file':
+			if (!path) {
+				path = _slash;
+			} else if (path[0] !== _slash) {
+				path = _slash + path;
+			}
+			break;
+	}
+	return path;
+}
+
 const _empty = '';
 const _slash = '/';
 const _regexp = /^(([^:/?#]+?):)?(\/\/([^/?#]*))?([^?#]*)(\?([^#]*))?(#(.*))?/;
@@ -142,14 +163,10 @@ export default class URI implements UriComponents {
 		} else {
 			this.scheme = schemeOrData || _empty;
 			this.authority = authority || _empty;
-			this.path = path || _empty;
+			this.path = _referenceResolution(this.scheme, path || _empty);
 			this.query = query || _empty;
 			this.fragment = fragment || _empty;
 
-			// if (this.path[0] !== _slash) {
-			// 	this.path = _slash + this.path;
-			// }
-
 			_validateUri(this);
 		}
 	}
@@ -253,14 +270,6 @@ export default class URI implements UriComponents {
 			}
 		}
 
-		// the slash-character is our 'default base' as we don't
-		// support constructing URIs relative to other URIs. This
-		// also means that we alter and potentially break paths.
-		// see https://tools.ietf.org/html/rfc3986#section-5.1.4
-		if (path[0] !== _slash) {
-			path = _slash + path;
-		}
-
 		return new _URI('file', authority, path, _empty, _empty);
 	}
 
@@ -377,7 +386,7 @@ class _URI extends URI {
 function _makeFsPath(uri: URI): string {
 
 	let value: string;
-	if (uri.authority && uri.path && uri.scheme === 'file') {
+	if (uri.authority && uri.path.length > 1 && uri.scheme === 'file') {
 		// unc path: file://shares/c$/far/boo
 		value = `//${uri.authority}${uri.path}`;
 	} else if (_driveLetterPath.test(uri.path)) {
diff --git a/src/vs/base/test/common/network.test.ts b/src/vs/base/test/common/network.test.ts
index cf77a0f56d9..7aba51f153b 100644
--- a/src/vs/base/test/common/network.test.ts
+++ b/src/vs/base/test/common/network.test.ts
@@ -36,7 +36,7 @@ suite('Network', () => {
 		);
 
 		assertUrl('http://www.test.com:8000#hash',
-			'http', 'www.test.com', '8000', '', '', 'hash'
+			'http', 'www.test.com', '8000', '/', '', 'hash'
 		);
 
 		assertUrl('http://www.test.com/#hash',
@@ -44,7 +44,7 @@ suite('Network', () => {
 		);
 
 		assertUrl('http://www.test.com#hash',
-			'http', 'www.test.com', '', '', '', 'hash'
+			'http', 'www.test.com', '', '/', '', 'hash'
 		);
 
 		assertUrl('http://www.test.com:8000/this/that/theother.html',
@@ -56,7 +56,7 @@ suite('Network', () => {
 		);
 
 		assertUrl('http://www.test.com:8000',
-			'http', 'www.test.com', '8000', '', '', ''
+			'http', 'www.test.com', '8000', '/', '', ''
 		);
 
 		assertUrl('http://www.test.com/',
diff --git a/src/vs/base/test/common/uri.test.ts b/src/vs/base/test/common/uri.test.ts
index 3341b0bcb6a..7d3e4ad0ddc 100644
--- a/src/vs/base/test/common/uri.test.ts
+++ b/src/vs/base/test/common/uri.test.ts
@@ -51,15 +51,15 @@ suite('URI', () => {
 	test('URI#fsPath - no `fsPath` when no `path`', () => {
 		const value = URI.parse('file://%2Fhome%2Fticino%2Fdesktop%2Fcpluscplus%2Ftest.cpp');
 		assert.equal(value.authority, '/home/ticino/desktop/cpluscplus/test.cpp');
-		assert.equal(value.path, '');
-		assert.equal(value.fsPath, '');
+		assert.equal(value.path, '/');
+		assert.equal(value.fsPath, '/');
 	});
 
 	test('http#toString', () => {
 		assert.equal(URI.from({ scheme: 'http', authority: 'www.msft.com', path: '/my/path' }).toString(), 'http://www.msft.com/my/path');
 		assert.equal(URI.from({ scheme: 'http', authority: 'www.msft.com', path: '/my/path' }).toString(), 'http://www.msft.com/my/path');
 		assert.equal(URI.from({ scheme: 'http', authority: 'www.MSFT.com', path: '/my/path' }).toString(), 'http://www.msft.com/my/path');
-		assert.equal(URI.from({ scheme: 'http', authority: '', path: 'my/path' }).toString(), 'http:my/path');
+		assert.equal(URI.from({ scheme: 'http', authority: '', path: 'my/path' }).toString(), 'http:/my/path');
 		assert.equal(URI.from({ scheme: 'http', authority: '', path: '/my/path' }).toString(), 'http:/my/path');
 		assert.equal(URI.from({ scheme: '', authority: '', path: 'my/path' }).toString(), 'my/path');
 		assert.equal(URI.from({ scheme: '', authority: '', path: '/my/path' }).toString(), '/my/path');
@@ -213,7 +213,7 @@ suite('URI', () => {
 		value = URI.parse('file:?q');
 		assert.equal(value.scheme, 'file');
 		assert.equal(value.authority, '');
-		assert.equal(value.path, '');
+		assert.equal(value.path, '/');
 		assert.equal(value.query, 'q');
 		assert.equal(value.fragment, '');
 
@@ -227,7 +227,7 @@ suite('URI', () => {
 		value = URI.parse('file:#d');
 		assert.equal(value.scheme, 'file');
 		assert.equal(value.authority, '');
-		assert.equal(value.path, '');
+		assert.equal(value.path, '/');
 		assert.equal(value.query, '');
 		assert.equal(value.fragment, 'd');