diff --git a/.github/actions/spelling/dictionary/dictionary.txt b/.github/actions/spelling/dictionary/dictionary.txt
index de26c13938a..2b3236d31dc 100644
--- a/.github/actions/spelling/dictionary/dictionary.txt
+++ b/.github/actions/spelling/dictionary/dictionary.txt
@@ -183443,6 +183443,8 @@ hostlership
 hostlerwife
 hostless
 hostly
+hostname
+hostnames
 hostry
 hosts
 hostship
diff --git a/src/cascadia/TerminalApp/TerminalPage.cpp b/src/cascadia/TerminalApp/TerminalPage.cpp
index b96a0e7cc09..8431ea32f49 100644
--- a/src/cascadia/TerminalApp/TerminalPage.cpp
+++ b/src/cascadia/TerminalApp/TerminalPage.cpp
@@ -2148,7 +2148,7 @@ namespace winrt::TerminalApp::implementation
         try
         {
             auto parsed = winrt::Windows::Foundation::Uri(eventArgs.Uri().c_str());
-            if (parsed.SchemeName() == L"http" || parsed.SchemeName() == L"https")
+            if (_IsUriSupported(parsed))
             {
                 ShellExecute(nullptr, L"open", eventArgs.Uri().c_str(), nullptr, nullptr, SW_SHOWNORMAL);
             }
@@ -2185,6 +2185,37 @@ namespace winrt::TerminalApp::implementation
         }
     }
 
+    // Method Description:
+    // - Determines if the given URI is currently supported
+    // Arguments:
+    // - The parsed URI
+    // Return value:
+    // - True if we support it, false otherwise
+    bool TerminalPage::_IsUriSupported(const winrt::Windows::Foundation::Uri& parsedUri)
+    {
+        if (parsedUri.SchemeName() == L"http" || parsedUri.SchemeName() == L"https")
+        {
+            return true;
+        }
+        if (parsedUri.SchemeName() == L"file")
+        {
+            const auto host = parsedUri.Host();
+            // If no hostname was provided or if the hostname was "localhost", Host() will return an empty string
+            // and we allow it
+            if (host == L"")
+            {
+                return true;
+            }
+            // TODO: by the OSC 8 spec, if a hostname (other than localhost) is provided, we _should_ be
+            // comparing that value against what is returned by GetComputerNameExW and making sure they match.
+            // However, ShellExecute does not seem to be happy with file URIs of the form
+            //          file://{hostname}/path/to/file.ext
+            // and so while we could do the hostname matching, we do not know how to actually open the URI
+            // if its given in that form. So for now we ignore all hostnames other than localhost
+        }
+        return false;
+    }
+
     void TerminalPage::_ControlNoticeRaisedHandler(const IInspectable /*sender*/, const Microsoft::Terminal::TerminalControl::NoticeEventArgs eventArgs)
     {
         winrt::hstring message = eventArgs.Message();
diff --git a/src/cascadia/TerminalApp/TerminalPage.h b/src/cascadia/TerminalApp/TerminalPage.h
index 67ca1841d60..603ddb1c551 100644
--- a/src/cascadia/TerminalApp/TerminalPage.h
+++ b/src/cascadia/TerminalApp/TerminalPage.h
@@ -217,6 +217,8 @@ namespace winrt::TerminalApp::implementation
                                                           const Microsoft::Terminal::TerminalControl::PasteFromClipboardEventArgs eventArgs);
 
         void _OpenHyperlinkHandler(const IInspectable sender, const Microsoft::Terminal::TerminalControl::OpenHyperlinkEventArgs eventArgs);
+        bool _IsUriSupported(const winrt::Windows::Foundation::Uri& parsedUri);
+
         void _ShowCouldNotOpenDialog(winrt::hstring reason, winrt::hstring uri);
         bool _CopyText(const bool singleLine, const Windows::Foundation::IReference<Microsoft::Terminal::TerminalControl::CopyFormat>& formats);