diff --git a/CHANGELOG.md b/CHANGELOG.md
index 6e1c838e32e..9e1a6a7014e 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -28,6 +28,7 @@ This project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0.htm
 - Fixes the instrument kind for noop async instruments. (#2461)
 - Change the `otlpmetric.Client` interface's `UploadMetrics` method to accept a single `ResourceMetrics` instead of a slice of them. (#2491)
 - Specify explicit buckets in Prometheus example. (#2493)
+- W3C baggage will now decode urlescaped values. (#2529)
 
 ## [1.3.0] - 2021-12-10
 
diff --git a/baggage/baggage.go b/baggage/baggage.go
index 3427c51b477..d52a298ed1b 100644
--- a/baggage/baggage.go
+++ b/baggage/baggage.go
@@ -269,7 +269,12 @@ func parseMember(member string) (Member, error) {
 		}
 		// "Leading and trailing whitespaces are allowed but MUST be trimmed
 		// when converting the header into a data structure."
-		key, value = strings.TrimSpace(kv[0]), strings.TrimSpace(kv[1])
+		key = strings.TrimSpace(kv[0])
+		var err error
+		value, err = url.QueryUnescape(strings.TrimSpace(kv[1]))
+		if err != nil {
+			return Member{}, fmt.Errorf("%w: %q", err, value)
+		}
 		if !keyRe.MatchString(key) {
 			return Member{}, fmt.Errorf("%w: %q", errInvalidKey, key)
 		}
diff --git a/baggage/baggage_test.go b/baggage/baggage_test.go
index 0635c823e9e..88c820319b5 100644
--- a/baggage/baggage_test.go
+++ b/baggage/baggage_test.go
@@ -339,6 +339,13 @@ func TestBaggageParse(t *testing.T) {
 				"foo": {Value: "2"},
 			},
 		},
+		{
+			name: "url encoded value",
+			in:   "key1=val%252",
+			want: baggage.List{
+				"key1": {Value: "val%2"},
+			},
+		},
 		{
 			name: "invalid member: empty",
 			in:   "foo=,,bar=",
diff --git a/propagation/baggage_test.go b/propagation/baggage_test.go
index 299e009e3cf..e98230a94ea 100644
--- a/propagation/baggage_test.go
+++ b/propagation/baggage_test.go
@@ -118,6 +118,13 @@ func TestExtractValidBaggageFromHTTPReq(t *testing.T) {
 				{Key: "key2", Value: "val2"},
 			},
 		},
+		{
+			name:   "valid header with url encoded string",
+			header: "key1=val%252",
+			want: members{
+				{Key: "key1", Value: "val%2"},
+			},
+		},
 	}
 
 	for _, tt := range tests {