diff --git a/changelogs/fragments/72623-ansible-test-unicode-paths.yml b/changelogs/fragments/72623-ansible-test-unicode-paths.yml
new file mode 100644
index 00000000000..dcc9234dd7e
--- /dev/null
+++ b/changelogs/fragments/72623-ansible-test-unicode-paths.yml
@@ -0,0 +1,2 @@
+bugfixes:
+- "ansible-test - convert target paths to unicode on Python 2 to avoid ``UnicodeDecodeError`` (https://github.com/ansible/ansible/issues/68398, https://github.com/ansible/ansible/pull/72623)."
diff --git a/test/lib/ansible_test/_internal/target.py b/test/lib/ansible_test/_internal/target.py
index c023424ef6f..7bafd71703c 100644
--- a/test/lib/ansible_test/_internal/target.py
+++ b/test/lib/ansible_test/_internal/target.py
@@ -12,6 +12,7 @@ from . import types as t
 
 from .encoding import (
     to_bytes,
+    to_text,
 )
 
 from .io import (
@@ -150,7 +151,7 @@ def filter_targets(targets,  # type: t.Iterable[TCompletionTarget]
             continue
 
         if directories and matched_directories:
-            yield DirectoryTarget(sorted(matched_directories, key=len)[0], target.modules)
+            yield DirectoryTarget(to_text(sorted(matched_directories, key=len)[0]), target.modules)
         else:
             yield target
 
@@ -284,7 +285,7 @@ def walk_integration_targets():
         paths.append(os.path.sep.join(path_tuple))
 
     for path in paths:
-        yield IntegrationTarget(path, modules, prefixes)
+        yield IntegrationTarget(to_text(path), modules, prefixes)
 
 
 def load_integration_prefixes():
@@ -332,7 +333,7 @@ def walk_test_targets(path=None, module_path=None, extensions=None, prefix=None,
         if symlink and not include_symlinks:
             continue
 
-        yield TestTarget(file_path, module_path, prefix, path, symlink)
+        yield TestTarget(to_text(file_path), module_path, prefix, path, symlink)
 
     file_paths = []