diff --git a/extensions/markdown-language-features/src/features/documentLinkProvider.ts b/extensions/markdown-language-features/src/features/documentLinkProvider.ts
index f4e1bd0a9d2..b35f3f0d787 100644
--- a/extensions/markdown-language-features/src/features/documentLinkProvider.ts
+++ b/extensions/markdown-language-features/src/features/documentLinkProvider.ts
@@ -50,8 +50,27 @@ function matchAll(
 	return out;
 }
 
+function extractDocumentLink(
+	document: vscode.TextDocument,
+	base: string,
+	pre: number,
+	link: string,
+	matchIndex: number | undefined
+): vscode.DocumentLink | undefined {
+	const offset = (matchIndex || 0) + pre;
+	const linkStart = document.positionAt(offset);
+	const linkEnd = document.positionAt(offset + link.length);
+	try {
+		return new vscode.DocumentLink(
+			new vscode.Range(linkStart, linkEnd),
+			normalizeLink(document, link, base));
+	} catch (e) {
+		return undefined;
+	}
+}
+
 export default class LinkProvider implements vscode.DocumentLinkProvider {
-	private readonly linkPattern = /(\[[^\]]*\]\(\s*)((([^\s\(\)]|\(\S*?\))+))\s*(".*?")?\)/g;
+	private readonly linkPattern = /(\[((!\[[^\]]*?\]\(\s*)([^\s\(\)]+?)\s*\)\]|[^\]]*\])\(\s*)(([^\s\(\)]|\(\S*?\))+)\s*(".*?")?\)/g;
 	private readonly referenceLinkPattern = /(\[([^\]]+)\]\[\s*?)([^\s\]]*?)\]/g;
 	private readonly definitionPattern = /^([\t ]*\[([^\]]+)\]:\s*)(\S+)/gm;
 
@@ -73,20 +92,15 @@ export default class LinkProvider implements vscode.DocumentLinkProvider {
 	): vscode.DocumentLink[] {
 		const results: vscode.DocumentLink[] = [];
 		for (const match of matchAll(this.linkPattern, text)) {
-			const pre = match[1];
-			const link = match[2];
-			const offset = (match.index || 0) + pre.length;
-			const linkStart = document.positionAt(offset);
-			const linkEnd = document.positionAt(offset + link.length);
-			try {
-				results.push(new vscode.DocumentLink(
-					new vscode.Range(linkStart, linkEnd),
-					normalizeLink(document, link, base)));
-			} catch (e) {
-				// noop
+			const matchImage = match[4] && extractDocumentLink(document, base, match[3].length + 1, match[4], match.index);
+			if (matchImage) {
+				results.push(matchImage);
+			}
+			const matchLink = extractDocumentLink(document, base, match[1].length, match[5], match.index);
+			if (matchLink) {
+				results.push(matchLink);
 			}
 		}
-
 		return results;
 	}
 
@@ -159,4 +173,4 @@ export default class LinkProvider implements vscode.DocumentLinkProvider {
 		}
 		return out;
 	}
-}
+}
\ No newline at end of file
diff --git a/extensions/markdown-language-features/src/test/documentLinkProvider.test.ts b/extensions/markdown-language-features/src/test/documentLinkProvider.test.ts
index 5a1d0c87880..f6309a027d3 100644
--- a/extensions/markdown-language-features/src/test/documentLinkProvider.test.ts
+++ b/extensions/markdown-language-features/src/test/documentLinkProvider.test.ts
@@ -103,6 +103,33 @@ suite('markdown.DocumentLinkProvider', () => {
 		assertRangeEqual(link1.range, new vscode.Range(0, 10, 0, 14));
 		assertRangeEqual(link2.range, new vscode.Range(0, 23, 0, 28));
 	});
+
+	// #49238
+	test('should handle hyperlinked images', () => {
+		{
+			const links = getLinksForFile('[![alt text](image.jpg)](https://example.com)');
+			assert.strictEqual(links.length, 2);
+			const [link1, link2] = links;
+			assertRangeEqual(link1.range, new vscode.Range(0,13,0,22));
+			assertRangeEqual(link2.range, new vscode.Range(0,25,0,44));
+		}
+		{
+			const links = getLinksForFile('[![a]( whitespace.jpg )]( https://whitespace.com )');
+			assert.strictEqual(links.length, 2);
+			const [link1, link2] = links;
+			assertRangeEqual(link1.range, new vscode.Range(0,7,0,21));
+			assertRangeEqual(link2.range, new vscode.Range(0,26,0,48));
+		}
+		{
+			const links = getLinksForFile('[![a](img1.jpg)](file1.txt) text [![a](img2.jpg)](file2.txt)');
+			assert.strictEqual(links.length, 4);
+			const [link1, link2, link3, link4] = links;
+			assertRangeEqual(link1.range, new vscode.Range(0,6,0,14));
+			assertRangeEqual(link2.range, new vscode.Range(0,17,0,26));
+			assertRangeEqual(link3.range, new vscode.Range(0,39,0,47));
+			assertRangeEqual(link4.range, new vscode.Range(0,50,0,59));
+		}
+	});
 });