diff --git a/extensions/vscode-api-tests/src/singlefolder-tests/workspace.test.ts b/extensions/vscode-api-tests/src/singlefolder-tests/workspace.test.ts
index 7ee205256bb..549bd426c13 100644
--- a/extensions/vscode-api-tests/src/singlefolder-tests/workspace.test.ts
+++ b/extensions/vscode-api-tests/src/singlefolder-tests/workspace.test.ts
@@ -1399,6 +1399,14 @@ suite('vscode API - workspace', () => {
 		assert.strictEqual(doc2.encoding, 'cp1252');
 	});
 
+	test('encoding: openTextDocument - can change the encoding of an existing untitled document', async () => {
+		const doc = await vscode.workspace.openTextDocument({ content: 'Hello World' });
+		assert.strictEqual(doc.encoding, 'utf8');
+
+		await vscode.workspace.openTextDocument(doc.uri, { encoding: 'windows1252' });
+		assert.strictEqual(doc.encoding, 'windows1252');
+	});
+
 	test('encoding: decode', async function () {
 		const uri = root.with({ path: posix.join(root.path, 'file.txt') });
 
diff --git a/src/vs/workbench/api/browser/mainThreadDocuments.ts b/src/vs/workbench/api/browser/mainThreadDocuments.ts
index 47925bd1c08..91655eb0ff3 100644
--- a/src/vs/workbench/api/browser/mainThreadDocuments.ts
+++ b/src/vs/workbench/api/browser/mainThreadDocuments.ts
@@ -290,6 +290,9 @@ export class MainThreadDocuments extends Disposable implements MainThreadDocumen
 			initialValue: options?.content,
 			encoding: options?.encoding
 		});
+		if (options?.encoding) {
+			await model.setEncoding(options.encoding);
+		}
 		const resource = model.resource;
 		const ref = await this._textModelResolverService.createModelReference(resource);
 		if (!this._modelTrackers.has(resource)) {