diff --git a/contrib/python3-whitelist b/contrib/python3-whitelist
--- a/contrib/python3-whitelist
+++ b/contrib/python3-whitelist
@@ -296,6 +296,7 @@
 test-hgwebdir-paths.py
 test-hgwebdir.t
 test-hgwebdirsym.t
+test-highlight.t
 test-histedit-arguments.t
 test-histedit-base.t
 test-histedit-bookmark-motion.t
diff --git a/hgext/highlight/__init__.py b/hgext/highlight/__init__.py
--- a/hgext/highlight/__init__.py
+++ b/hgext/highlight/__init__.py
@@ -36,6 +36,7 @@
 
 from mercurial import (
     extensions,
+    pycompat,
 )
 
 # Note for extension authors: ONLY specify testedwith = 'ships-with-hg-core' for
@@ -79,11 +80,12 @@
 
 def generate_css(web):
     pg_style = web.config('web', 'pygments_style', 'colorful')
-    fmter = highlight.HtmlFormatter(style=pg_style)
+    fmter = highlight.HtmlFormatter(style=pycompat.sysstr(pg_style))
     web.res.headers['Content-Type'] = 'text/css'
+    style_defs = fmter.get_style_defs(pycompat.sysstr(''))
     web.res.setbodybytes(''.join([
         '/* pygments_style = %s */\n\n' % pg_style,
-        fmter.get_style_defs(''),
+        pycompat.bytestr(style_defs),
     ]))
     return web.res.sendresponse()
 
diff --git a/hgext/highlight/highlight.py b/hgext/highlight/highlight.py
--- a/hgext/highlight/highlight.py
+++ b/hgext/highlight/highlight.py
@@ -15,6 +15,7 @@
 
 from mercurial import (
     encoding,
+    pycompat,
 )
 
 from mercurial.utils import (
@@ -61,11 +62,12 @@
 
     # Pygments is best used with Unicode strings:
     # <http://pygments.org/docs/unicode/>
-    text = text.decode(encoding.encoding, 'replace')
+    text = text.decode(pycompat.sysstr(encoding.encoding), 'replace')
 
     # To get multi-line strings right, we can't format line-by-line
     try:
-        lexer = guess_lexer_for_filename(fctx.path(), text[:1024],
+        path = pycompat.sysstr(fctx.path())
+        lexer = guess_lexer_for_filename(path, text[:1024],
                                          stripnl=False)
     except (ClassNotFound, ValueError):
         # guess_lexer will return a lexer if *any* lexer matches. There is
@@ -84,10 +86,10 @@
     if isinstance(lexer, TextLexer):
         return
 
-    formatter = HtmlFormatter(nowrap=True, style=style)
+    formatter = HtmlFormatter(nowrap=True, style=pycompat.sysstr(style))
 
     colorized = highlight(text, lexer, formatter)
-    coloriter = (s.encode(encoding.encoding, 'replace')
+    coloriter = (s.encode(pycompat.sysstr(encoding.encoding), 'replace')
                  for s in colorized.splitlines())
 
     tmpl._filters['colorize'] = lambda x: next(coloriter)