diff --git a/src/Microsoft.PowerShell.ConsoleHost/host/msh/StartTranscriptCmdlet.cs b/src/Microsoft.PowerShell.ConsoleHost/host/msh/StartTranscriptCmdlet.cs
index 3f413df76ef..a58f3fae297 100644
--- a/src/Microsoft.PowerShell.ConsoleHost/host/msh/StartTranscriptCmdlet.cs
+++ b/src/Microsoft.PowerShell.ConsoleHost/host/msh/StartTranscriptCmdlet.cs
@@ -228,7 +228,7 @@ protected override void BeginProcessing()
                     // If they didn't specify -Append, empty the file
                     if (!_shouldAppend)
                     {
-                        System.IO.File.WriteAllText(effectiveFilePath, string.Empty);
+                        System.IO.File.WriteAllText(effectiveFilePath, string.Empty, Utils.utf8NoBom);
                     }
                 }
 
diff --git a/test/powershell/Modules/Microsoft.Powershell.Host/Start-Transcript.Tests.ps1 b/test/powershell/Modules/Microsoft.Powershell.Host/Start-Transcript.Tests.ps1
index d350c44d80c..00b773608d7 100644
--- a/test/powershell/Modules/Microsoft.Powershell.Host/Start-Transcript.Tests.ps1
+++ b/test/powershell/Modules/Microsoft.Powershell.Host/Start-Transcript.Tests.ps1
@@ -47,6 +47,17 @@ Describe "Start-Transcript, Stop-Transcript tests" -tags "CI" {
         }
         ## function ends here
 
+        $defaultEncoding = [System.Text.UTF8Encoding]::new($true)
+        function GetFileEncoding {
+            param (
+                [string] $filePath
+            )
+
+            $reader = [System.IO.StreamReader]::new($filePath, $defaultEncoding, $true)
+            $reader.Read() | Out-Null
+            return $reader.CurrentEncoding.BodyName
+        }
+
         $transcriptFilePath = Join-Path $TestDrive "transcriptdata.txt"
         Remove-Item $transcriptFilePath -Force -ErrorAction SilentlyContinue
     }
@@ -129,6 +140,31 @@ Describe "Start-Transcript, Stop-Transcript tests" -tags "CI" {
         # Nothing should have been returned by the FileSystemWatcher
         Receive-Job $job | Should -Be $null
     }
+    It "Should keep the existing file's encoding if the 'Append' parameter is used"{
+        "Text" | Out-File -Encoding unicode $transcriptFilePath
+
+        Start-Transcript -Append -Path $transcriptFilePath
+        Get-Date | Out-Null
+        Stop-Transcript
+
+        GetFileEncoding $transcriptFilePath | Should -BeExactly 'utf-16'
+    }
+    It "Should default to utf8 with 'Append' parameter and file doesn't exist"{
+        Start-Transcript -Append -Path $transcriptFilePath
+        Get-Date | Out-Null
+        Stop-Transcript
+
+        GetFileEncoding $transcriptFilePath | Should -BeExactly 'utf-8'
+    }
+    It "Should create a new utf8 encoded file if no 'Append' parameter is set regardless of existing file's encoding"{
+        "Text" | Out-File -Encoding unicode $transcriptFilePath
+
+        Start-Transcript -Path $transcriptFilePath
+        Get-Date | Out-Null
+        Stop-Transcript
+
+        GetFileEncoding $transcriptFilePath | Should -BeExactly 'utf-8'
+    }
     It "Transcription should remain active if other runspace in the host get closed" {
         try {
             $ps = [powershell]::Create()