diff --git a/extensions/markdown-language-features/src/features/preview.ts b/extensions/markdown-language-features/src/features/preview.ts
index b41bcf131e8..5edc8c1eb7a 100644
--- a/extensions/markdown-language-features/src/features/preview.ts
+++ b/extensions/markdown-language-features/src/features/preview.ts
@@ -16,7 +16,7 @@ import { MarkdownPreviewConfigurationManager } from './previewConfig';
 import { MarkdownContributionProvider, MarkdownContributions } from '../markdownExtensions';
 import { isMarkdownFile } from '../util/file';
 import { resolveLinkToMarkdownFile } from '../commands/openDocumentLink';
-import { WebviewResourceProvider } from '../util/resources';
+import { WebviewResourceProvider, normalizeResource } from '../util/resources';
 const localize = nls.loadMessageBundle();
 
 interface WebviewMessage {
@@ -393,14 +393,14 @@ export class MarkdownPreview extends Disposable {
 			return;
 		}
 
-		const resource = this._resource;
+		const markdownResource = this._resource;
 
 		clearTimeout(this.throttleTimer);
 		this.throttleTimer = undefined;
 
 		let document: vscode.TextDocument;
 		try {
-			document = await vscode.workspace.openTextDocument(resource);
+			document = await vscode.workspace.openTextDocument(markdownResource);
 		} catch {
 			await this.showFileNotFoundError();
 			return;
@@ -410,20 +410,22 @@ export class MarkdownPreview extends Disposable {
 			return;
 		}
 
-		const pendingVersion = new PreviewDocumentVersion(resource, document.version);
+		const pendingVersion = new PreviewDocumentVersion(markdownResource, document.version);
 		if (!this.forceUpdate && this.currentVersion && this.currentVersion.equals(pendingVersion)) {
 			if (this.line) {
-				this.updateForView(resource, this.line);
+				this.updateForView(markdownResource, this.line);
 			}
 			return;
 		}
 		this.forceUpdate = false;
 
 		this.currentVersion = pendingVersion;
-		if (this._resource === resource) {
+		if (this._resource === markdownResource) {
 			const self = this;
 			const resourceProvider: WebviewResourceProvider = {
-				toWebviewResource: (resource) => this.editor.webview.toWebviewResource(resource),
+				toWebviewResource: (resource) => {
+					return this.editor.webview.toWebviewResource(normalizeResource(markdownResource, resource));
+				},
 				get cspSource() { return self.editor.webview.cspSource; }
 			};
 			const content = await this._contentProvider.provideTextDocumentContent(document, resourceProvider, this._previewConfigurations, this.line, this.state);
@@ -446,21 +448,19 @@ export class MarkdownPreview extends Disposable {
 	}
 
 	private static getLocalResourceRoots(
-		resource: vscode.Uri,
+		base: vscode.Uri,
 		contributions: MarkdownContributions
 	): ReadonlyArray<vscode.Uri> {
-		const baseRoots = contributions.previewResourceRoots;
+		const baseRoots = Array.from(contributions.previewResourceRoots);
 
-		const folder = vscode.workspace.getWorkspaceFolder(resource);
+		const folder = vscode.workspace.getWorkspaceFolder(base);
 		if (folder) {
-			return baseRoots.concat(folder.uri);
+			baseRoots.push(folder.uri);
+		} else if (!base.scheme || base.scheme === 'file') {
+			baseRoots.push(vscode.Uri.file(path.dirname(base.fsPath)));
 		}
 
-		if (!resource.scheme || resource.scheme === 'file') {
-			return baseRoots.concat(vscode.Uri.file(path.dirname(resource.fsPath)));
-		}
-
-		return baseRoots;
+		return baseRoots.map(root => normalizeResource(base, root));
 	}
 
 	private onDidScrollPreview(line: number) {
diff --git a/extensions/markdown-language-features/src/util/resources.ts b/extensions/markdown-language-features/src/util/resources.ts
index 91fac463a2c..1def7adcce0 100644
--- a/extensions/markdown-language-features/src/util/resources.ts
+++ b/extensions/markdown-language-features/src/util/resources.ts
@@ -9,4 +9,25 @@ export interface WebviewResourceProvider {
 	toWebviewResource(resource: vscode.Uri): vscode.Uri;
 
 	readonly cspSource: string;
+}
+
+export function normalizeResource(
+	base: vscode.Uri,
+	resource: vscode.Uri
+): vscode.Uri {
+	// If we  have a windows path and are loading a workspace with an authority,
+	// make sure we use a unc path with an explicit localhost authority.
+	//
+	// Otherwise, the `<base>` rule will insert the authority into the resolved resource
+	// URI incorrectly.
+	if (base.authority && !resource.authority) {
+		const driveMatch = resource.path.match(/^\/(\w):\//);
+		if (driveMatch) {
+			return vscode.Uri.file(`\\\\localhost\\${driveMatch[1]}$\\${resource.fsPath.replace(/^\w:\\/, '')}`).with({
+				fragment: resource.fragment,
+				query: resource.query
+			});
+		}
+	}
+	return resource;
 }
\ No newline at end of file
diff --git a/src/vs/workbench/contrib/webview/common/resourceLoader.ts b/src/vs/workbench/contrib/webview/common/resourceLoader.ts
index f852c52b9a7..ea33db2e268 100644
--- a/src/vs/workbench/contrib/webview/common/resourceLoader.ts
+++ b/src/vs/workbench/contrib/webview/common/resourceLoader.ts
@@ -45,11 +45,14 @@ export async function loadLocalResource(
 	extensionLocation: URI | undefined,
 	getRoots: () => ReadonlyArray<URI>
 ): Promise<LocalResourceResponse> {
-	const requestPath = requestUri.authority ? `//${requestUri.authority}${requestUri.path}` : requestUri.path;
-	const normalizedPath = URI.file(requestPath);
+	const normalizedPath = requestUri.with({
+		scheme: 'file',
+		fragment: '',
+		query: '',
+	});
+
 	for (const root of getRoots()) {
-		const rootPath = root.fsPath + (endsWith(root.fsPath, sep) ? '' : sep);
-		if (!startsWith(normalizedPath.fsPath, rootPath)) {
+		if (!containsResource(root, normalizedPath)) {
 			continue;
 		}
 
@@ -70,3 +73,8 @@ export async function loadLocalResource(
 
 	return AccessDenied;
 }
+
+function containsResource(root: URI, resource: URI): boolean {
+	const rootPath = root.fsPath + (endsWith(root.fsPath, sep) ? '' : sep);
+	return startsWith(resource.fsPath, rootPath);
+}