diff --git a/CHANGELOG.md b/CHANGELOG.md
index c606a16a..81b5229b 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -3,6 +3,9 @@
 [PyPI History][1]
 [1]: https://pypi.org/project/demisto-py/#history
 
+## 3.2.10
+* Added URL decoding of proxy url credentials.
+
 ## 3.2.9
 * Added the ability to add custom request headers.
 
diff --git a/demisto_client/demisto_api/rest.py b/demisto_client/demisto_api/rest.py
index 5cbb1a78..d026eaf3 100644
--- a/demisto_client/demisto_api/rest.py
+++ b/demisto_client/demisto_api/rest.py
@@ -27,6 +27,7 @@
 
 try:
     import urllib3
+    import urllib
 except ImportError:
     raise ImportError('Swagger python client requires urllib3.')
 
@@ -88,7 +89,8 @@ def __init__(self, configuration, pools_size=4, maxsize=None):
             proxy_headers = None
             parsed_proxy_url = urllib3.util.parse_url(configuration.proxy)
             if parsed_proxy_url.auth is not None:
-                proxy_headers = urllib3.util.make_headers(proxy_basic_auth=parsed_proxy_url.auth)
+                configuration.proxy_auth = urllib.parse.unquote(parsed_proxy_url.auth)
+                proxy_headers = urllib3.util.make_headers(proxy_basic_auth=configuration.proxy_auth)
 
             self.pool_manager = urllib3.ProxyManager(
                 num_pools=pools_size,
diff --git a/gen-code.sh b/gen-code.sh
index 14acedad..58d3c237 100755
--- a/gen-code.sh
+++ b/gen-code.sh
@@ -32,6 +32,7 @@ mv README.md.org README.md
 sed -i "${INPLACE[@]}" -e 's/^from demisto_client.demisto_api.models.advance_arg import AdvanceArg/# &/' demisto_client/demisto_api/models/operator_argument.py
 sed -i "${INPLACE[@]}" -e 's/^from demisto_client.demisto_api.models.group import Group/# &/' demisto_client/demisto_api/models/groups.py
 sed -i "${INPLACE[@]}" -e 's/^from demisto_client.demisto_api.models.investigation_playbook import InvestigationPlaybook/# &/' demisto_client/demisto_api/models/investigation_playbook_task.py
+
 # __api_call needs to work with dict objects and not Classes when updating data such as POST requests
 sed -i "${INPLACE[@]}" -e 's/config = self.configuration/&; body = demisto_client.to_extended_dict(body)  # noqa: E702/' demisto_client/demisto_api/api_client.py
 # Update the docs
@@ -73,11 +74,14 @@ sed -i "${INPLACE[@]}" -e 's/"""Custom error messages for exception"""/"""Custom
         else:\
             sensitive_logging = False/' demisto_client/demisto_api/rest.py
 
+sed -i "${INPLACE[@]}" -e 's/import urllib3/import urllib3\
+    import urllib/'  demisto_client/demisto_api/rest.py
 sed -i "${INPLACE[@]}" -e 's/if configuration.proxy:/if configuration.proxy:\
             proxy_headers = None\
             parsed_proxy_url = urllib3.util.parse_url(configuration.proxy)\
             if parsed_proxy_url.auth is not None:\
-                proxy_headers = urllib3.util.make_headers(proxy_basic_auth=parsed_proxy_url.auth)\
+                configuration.proxy_auth = urllib.parse.unquote(parsed_proxy_url.auth)\
+                proxy_headers = urllib3.util.make_headers(proxy_basic_auth=configuration.proxy_auth)\
 /' demisto_client/demisto_api/rest.py
 
 sed -i "${INPLACE[@]}" -e 's/proxy_url=configuration.proxy,/proxy_headers=proxy_headers,\
diff --git a/tests/mocks_test.py b/tests/mocks_test.py
index da621c57..983caef4 100644
--- a/tests/mocks_test.py
+++ b/tests/mocks_test.py
@@ -405,6 +405,51 @@ def run():
         assert_reset()
 
 
+class TestWithProxyBasicAuthentication(unittest.TestCase):
+
+    def test_generic_request(self):
+        """
+        Given:
+        - Request which use proxy authentication
+        When:
+        - Environment variable HTTP_PROXY and HTTPS_PROXY which contains a username and password with special characters
+        Then:
+        - Ensure the request made to the correct url via correct proxy username and password. Special character should be decoded.
+        """
+        import sys
+        # Error should be the same in both Py2 and Py3, but Py2 does not support unittest mock in
+        # the same way
+        if sys.version_info[0] > 2:
+            from unittest import mock
+
+            @mock.patch.dict(os.environ, {"HTTP_PROXY": "http://user1:pass%21%23%24%25%5E@localhost:8080"})
+            @mock.patch.dict(os.environ, {"HTTPS_PROXY": "http://user1:pass%21%23%24%25%5E@localhost:8080"})
+            @responses.activate
+            def run():
+                responses.add('POST', 'http://localhost:8080/test',
+                              body="Good",
+                              status=200,
+                              content_type='text/plain')
+                api_instance = demisto_client.configure(base_url=host, api_key=api_key, debug=False)
+
+                api_instance.generic_request('/test', 'POST',
+                                            body="this is a test",
+                                            content_type='text/plain',
+                                            accept='text/plain')
+
+                assert len(responses.calls) == 1
+                assert responses.calls[0].request.url == 'http://localhost:8080/test'
+                assert responses.calls[0].request.host == 'localhost'
+                assert responses.calls[0].request.scheme == 'http'
+                assert api_instance.api_client.configuration.proxy_auth == 'user1:pass!#$%^'
+                
+        else:
+            def run():
+                assert 1 == 1
+        run()
+        assert_reset()
+
+
 def test_import_incidentfields(mocker):
     """
     Given: