diff --git a/packages/mcp-server/src/features/local-rest-api/headerEncoding.test.ts b/packages/mcp-server/src/features/local-rest-api/headerEncoding.test.ts
new file mode 100644
index 0000000..ac001f6
--- /dev/null
+++ b/packages/mcp-server/src/features/local-rest-api/headerEncoding.test.ts
@@ -0,0 +1,209 @@
+import { describe, expect, test } from "bun:test";
+
+/**
+ * Tests for header encoding logic used in patch_active_file and patch_vault_file tools
+ * to handle special characters, newlines, and multi-byte characters in header values
+ */
+describe("Header value encoding for PATCH operations", () => {
+  /**
+   * Helper function that replicates the header encoding logic
+   * This ensures special characters in Target and Target-Delimiter headers are properly encoded
+   */
+  function encodeHeaderValue(value: string): string {
+    return encodeURIComponent(value);
+  }
+
+  test("encodes special characters in target header", () => {
+    const target = "My Heading #1";
+    const encoded = encodeHeaderValue(target);
+    expect(encoded).toBe("My%20Heading%20%231");
+  });
+
+  test("encodes newline characters in target header", () => {
+    const target = "Line 1\nLine 2";
+    const encoded = encodeHeaderValue(target);
+    expect(encoded).toBe("Line%201%0ALine%202");
+  });
+
+  test("encodes multi-byte Unicode characters", () => {
+    const target = "日本語のヘッダー";
+    const encoded = encodeHeaderValue(target);
+    // Multi-byte characters should be percent-encoded
+    expect(encoded).toContain("%");
+    expect(encoded).not.toBe(target);
+  });
+
+  test("encodes emoji characters", () => {
+    const target = "📝 Notes";
+    const encoded = encodeHeaderValue(target);
+    expect(encoded).toContain("%");
+    expect(encoded).not.toContain("📝");
+  });
+
+  test("encodes forward slashes", () => {
+    const target = "Path/To/Heading";
+    const encoded = encodeHeaderValue(target);
+    expect(encoded).toBe("Path%2FTo%2FHeading");
+  });
+
+  test("encodes backslashes", () => {
+    const target = "Path\\To\\Heading";
+    const encoded = encodeHeaderValue(target);
+    expect(encoded).toBe("Path%5CTo%5CHeading");
+  });
+
+  test("encodes colons", () => {
+    const target = "Time: 12:00";
+    const encoded = encodeHeaderValue(target);
+    expect(encoded).toBe("Time%3A%2012%3A00");
+  });
+
+  test("encodes equals signs", () => {
+    const target = "key=value";
+    const encoded = encodeHeaderValue(target);
+    expect(encoded).toBe("key%3Dvalue");
+  });
+
+  test("encodes ampersands", () => {
+    const target = "Tom & Jerry";
+    const encoded = encodeHeaderValue(target);
+    expect(encoded).toBe("Tom%20%26%20Jerry");
+  });
+
+  test("encodes question marks", () => {
+    const target = "Is this working?";
+    const encoded = encodeHeaderValue(target);
+    expect(encoded).toBe("Is%20this%20working%3F");
+  });
+
+  test("encodes carriage return characters", () => {
+    const target = "Line 1\r\nLine 2";
+    const encoded = encodeHeaderValue(target);
+    expect(encoded).toBe("Line%201%0D%0ALine%202");
+  });
+
+  test("handles empty strings", () => {
+    const target = "";
+    const encoded = encodeHeaderValue(target);
+    expect(encoded).toBe("");
+  });
+
+  test("preserves alphanumeric characters", () => {
+    const target = "SimpleHeading123";
+    const encoded = encodeHeaderValue(target);
+    expect(encoded).toBe("SimpleHeading123");
+  });
+
+  test("encodes spaces", () => {
+    const target = "Multiple   Spaces";
+    const encoded = encodeHeaderValue(target);
+    expect(encoded).toBe("Multiple%20%20%20Spaces");
+  });
+
+  test("encodes tab characters", () => {
+    const target = "Tab\there";
+    const encoded = encodeHeaderValue(target);
+    expect(encoded).toBe("Tab%09here");
+  });
+});
+
+describe("Header construction for PATCH operations", () => {
+  /**
+   * Simulates the full header construction as done in patch_active_file
+   * and patch_vault_file to ensure proper encoding
+   */
+  interface PatchHeaders {
+    Operation: string;
+    "Target-Type": string;
+    Target: string;
+    "Create-Target-If-Missing": string;
+    "Target-Delimiter"?: string;
+    "Trim-Target-Whitespace"?: string;
+    "Content-Type"?: string;
+  }
+
+  function constructPatchHeaders(args: {
+    operation: string;
+    targetType: string;
+    target: string;
+    targetDelimiter?: string;
+    trimTargetWhitespace?: boolean;
+    contentType?: string;
+  }): PatchHeaders {
+    const headers: PatchHeaders = {
+      Operation: args.operation,
+      "Target-Type": args.targetType,
+      Target: encodeURIComponent(args.target),
+      "Create-Target-If-Missing": "true",
+    };
+
+    if (args.targetDelimiter) {
+      headers["Target-Delimiter"] = encodeURIComponent(args.targetDelimiter);
+    }
+    if (args.trimTargetWhitespace !== undefined) {
+      headers["Trim-Target-Whitespace"] = String(args.trimTargetWhitespace);
+    }
+    if (args.contentType) {
+      headers["Content-Type"] = args.contentType;
+    }
+
+    return headers;
+  }
+
+  test("constructs headers with encoded target", () => {
+    const headers = constructPatchHeaders({
+      operation: "insert-after",
+      targetType: "heading",
+      target: "My Heading #1",
+    });
+
+    expect(headers.Target).toBe("My%20Heading%20%231");
+    expect(headers.Operation).toBe("insert-after");
+    expect(headers["Target-Type"]).toBe("heading");
+  });
+
+  test("constructs headers with encoded delimiter", () => {
+    const headers = constructPatchHeaders({
+      operation: "insert-after",
+      targetType: "heading",
+      target: "Simple",
+      targetDelimiter: "\n---\n",
+    });
+
+    expect(headers["Target-Delimiter"]).toBe("%0A---%0A");
+  });
+
+  test("handles multi-byte characters in target and delimiter", () => {
+    const headers = constructPatchHeaders({
+      operation: "insert-after",
+      targetType: "heading",
+      target: "見出し",
+      targetDelimiter: "区切り文字",
+    });
+
+    expect(headers.Target).toContain("%");
+    expect(headers["Target-Delimiter"]).toContain("%");
+  });
+
+  test("preserves trimTargetWhitespace boolean as string", () => {
+    const headers = constructPatchHeaders({
+      operation: "insert-after",
+      targetType: "heading",
+      target: "Simple",
+      trimTargetWhitespace: true,
+    });
+
+    expect(headers["Trim-Target-Whitespace"]).toBe("true");
+  });
+
+  test("contentType header is not encoded", () => {
+    const headers = constructPatchHeaders({
+      operation: "insert-after",
+      targetType: "heading",
+      target: "Simple",
+      contentType: "text/plain",
+    });
+
+    expect(headers["Content-Type"]).toBe("text/plain");
+  });
+});
diff --git a/packages/mcp-server/src/features/local-rest-api/index.ts b/packages/mcp-server/src/features/local-rest-api/index.ts
index 37a1424..050bd0d 100644
--- a/packages/mcp-server/src/features/local-rest-api/index.ts
+++ b/packages/mcp-server/src/features/local-rest-api/index.ts
@@ -95,15 +95,16 @@ export function registerLocalRestApiTools(tools: ToolRegistry, server: Server) {
       "Insert or modify content in the currently-open note relative to a heading, block reference, or frontmatter field.",
     ),
     async ({ arguments: args }) => {
+      // Encode header values to handle special characters, newlines, and multi-byte characters
       const headers: Record<string, string> = {
         Operation: args.operation,
         "Target-Type": args.targetType,
-        Target: args.target,
+        Target: encodeURIComponent(args.target),
         "Create-Target-If-Missing": "true",
       };
 
       if (args.targetDelimiter) {
-        headers["Target-Delimiter"] = args.targetDelimiter;
+        headers["Target-Delimiter"] = encodeURIComponent(args.targetDelimiter);
       }
       if (args.trimTargetWhitespace !== undefined) {
         headers["Trim-Target-Whitespace"] = String(args.trimTargetWhitespace);
@@ -356,15 +357,16 @@ export function registerLocalRestApiTools(tools: ToolRegistry, server: Server) {
       "Insert or modify content in a file relative to a heading, block reference, or frontmatter field.",
     ),
     async ({ arguments: args }) => {
+      // Encode header values to handle special characters, newlines, and multi-byte characters
       const headers: HeadersInit = {
         Operation: args.operation,
         "Target-Type": args.targetType,
-        Target: args.target,
+        Target: encodeURIComponent(args.target),
         "Create-Target-If-Missing": "true",
       };
 
       if (args.targetDelimiter) {
-        headers["Target-Delimiter"] = args.targetDelimiter;
+        headers["Target-Delimiter"] = encodeURIComponent(args.targetDelimiter);
       }
       if (args.trimTargetWhitespace !== undefined) {
         headers["Trim-Target-Whitespace"] = String(args.trimTargetWhitespace);