diff --git a/news/7667.bugfix b/news/7667.bugfix
new file mode 100644
index 00000000000..e42e128e97e
--- /dev/null
+++ b/news/7667.bugfix
@@ -0,0 +1 @@
+Fix extraction of files with utf-8 encoded paths from tars.
diff --git a/src/pip/_internal/utils/unpacking.py b/src/pip/_internal/utils/unpacking.py
index 7252dc217bf..7104753ad99 100644
--- a/src/pip/_internal/utils/unpacking.py
+++ b/src/pip/_internal/utils/unpacking.py
@@ -14,6 +14,8 @@
 import tarfile
 import zipfile
 
+from pip._vendor.six import ensure_text
+
 from pip._internal.exceptions import InstallationError
 from pip._internal.utils.filetypes import (
     BZ2_EXTENSIONS,
@@ -174,7 +176,7 @@ def untar_file(filename, location):
             'Cannot determine compression type for file %s', filename,
         )
         mode = 'r:*'
-    tar = tarfile.open(filename, mode)
+    tar = tarfile.open(filename, mode, encoding="utf-8")
     try:
         leading = has_leading_dir([
             member.name for member in tar.getmembers()
@@ -184,7 +186,16 @@ def untar_file(filename, location):
             if leading:
                 # https://github.com/python/mypy/issues/1174
                 fn = split_leading_dir(fn)[1]  # type: ignore
-            path = os.path.join(location, fn)
+
+            path = os.path.join(location, fn)  # type: AnyStr
+            try:
+                # Convert path to text so all APIs below work with unicode files.
+                path = ensure_text(path)
+            except UnicodeDecodeError:
+                # Silently continue, for backwards compatibility on non-PAX
+                # archives.
+                pass
+
             if not is_within_directory(location, path):
                 message = (
                     'The tar file ({}) has a file ({}) trying to install '
diff --git a/tests/unit/test_utils_unpacking.py b/tests/unit/test_utils_unpacking.py
index af9ae1c0e71..c6d6f73142b 100644
--- a/tests/unit/test_utils_unpacking.py
+++ b/tests/unit/test_utils_unpacking.py
@@ -1,3 +1,4 @@
+# -*- coding: utf-8 -*-
 import os
 import shutil
 import stat
@@ -8,6 +9,7 @@
 import zipfile
 
 import pytest
+from pip._vendor.six import ensure_str, ensure_text
 
 from pip._internal.exceptions import InstallationError
 from pip._internal.utils.unpacking import (
@@ -172,6 +174,25 @@ def test_unpack_tar_success(self):
         untar_file(test_tar, self.tempdir)
 
 
+def test_unpack_tar_unicode(tmpdir):
+    test_tar = tmpdir / "test.tar"
+    # tarfile tries to decode incoming
+    with tarfile.open(
+        test_tar, "w", format=tarfile.PAX_FORMAT, encoding="utf-8"
+    ) as f:
+        metadata = tarfile.TarInfo(ensure_str(u"dir/åäö_日本語.py"))
+        f.addfile(metadata, "hello world")
+
+    output_dir = tmpdir / "output"
+    output_dir.mkdir()
+
+    untar_file(test_tar, str(output_dir))
+
+    output_dir_name = ensure_text(str(output_dir))
+    contents = os.listdir(output_dir_name)
+    assert u"åäö_日本語.py" in contents
+
+
 @pytest.mark.parametrize('args, expected', [
     # Test the second containing the first.
     (('parent/sub', 'parent/'), False),