diff --git a/.changeset/fix-github-issues-file-source-location.md b/.changeset/fix-github-issues-file-source-location.md
new file mode 100644
index 00000000000..c6be384b86c
--- /dev/null
+++ b/.changeset/fix-github-issues-file-source-location.md
@@ -0,0 +1,5 @@
+---
+'@backstage-community/plugin-github-issues': patch
+---
+
+Fixed `getHostnameFromEntity` to handle `file:` type source-locations gracefully instead of throwing `TypeError: Invalid URL`
diff --git a/workspaces/github/plugins/github-issues/src/hooks/useEntityGithubRepositories.test.ts b/workspaces/github/plugins/github-issues/src/hooks/useEntityGithubRepositories.test.ts
new file mode 100644
index 00000000000..94d189756c9
--- /dev/null
+++ b/workspaces/github/plugins/github-issues/src/hooks/useEntityGithubRepositories.test.ts
@@ -0,0 +1,110 @@
+/*
+ * Copyright 2022 The Backstage Authors
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ *     http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+
+import { Entity } from '@backstage/catalog-model';
+import {
+  getHostnameFromEntity,
+  getProjectNameFromEntity,
+} from './useEntityGithubRepositories';
+
+describe('getProjectNameFromEntity', () => {
+  it('returns the project slug annotation', () => {
+    const entity: Entity = {
+      apiVersion: 'backstage.io/v1alpha1',
+      kind: 'Component',
+      metadata: {
+        name: 'my-service',
+        annotations: {
+          'github.com/project-slug': 'my-org/my-service',
+        },
+      },
+    };
+    expect(getProjectNameFromEntity(entity)).toBe('my-org/my-service');
+  });
+
+  it('returns empty string when annotation is missing', () => {
+    const entity: Entity = {
+      apiVersion: 'backstage.io/v1alpha1',
+      kind: 'Component',
+      metadata: {
+        name: 'my-service',
+      },
+    };
+    expect(getProjectNameFromEntity(entity)).toBe('');
+  });
+});
+
+describe('getHostnameFromEntity', () => {
+  it('returns hostname from url type source-location', () => {
+    const entity: Entity = {
+      apiVersion: 'backstage.io/v1alpha1',
+      kind: 'Component',
+      metadata: {
+        name: 'my-service',
+        annotations: {
+          'backstage.io/source-location':
+            'url:https://github.com/my-org/my-service/tree/main/',
+        },
+      },
+    };
+    expect(getHostnameFromEntity(entity)).toBe('github.com');
+  });
+
+  it('returns hostname for GitHub Enterprise source-location', () => {
+    const entity: Entity = {
+      apiVersion: 'backstage.io/v1alpha1',
+      kind: 'Component',
+      metadata: {
+        name: 'my-service',
+        annotations: {
+          'backstage.io/source-location':
+            'url:https://github.mycompany.com/my-org/my-service/',
+        },
+      },
+    };
+    expect(getHostnameFromEntity(entity)).toBe('github.mycompany.com');
+  });
+
+  it('returns github.com for file type source-location', () => {
+    const entity: Entity = {
+      apiVersion: 'backstage.io/v1alpha1',
+      kind: 'Component',
+      metadata: {
+        name: 'my-service',
+        annotations: {
+          'backstage.io/source-location':
+            'file:./catalog-entities/my-service.yaml',
+        },
+      },
+    };
+    expect(getHostnameFromEntity(entity)).toBe('github.com');
+  });
+
+  it('returns github.com for managed-by-location fallback with file type', () => {
+    const entity: Entity = {
+      apiVersion: 'backstage.io/v1alpha1',
+      kind: 'Component',
+      metadata: {
+        name: 'my-service',
+        annotations: {
+          'backstage.io/managed-by-location':
+            'file:/opt/app-root/src/catalog-info.yaml',
+        },
+      },
+    };
+    expect(getHostnameFromEntity(entity)).toBe('github.com');
+  });
+});
diff --git a/workspaces/github/plugins/github-issues/src/hooks/useEntityGithubRepositories.ts b/workspaces/github/plugins/github-issues/src/hooks/useEntityGithubRepositories.ts
index 26e24a47e15..dec4e327699 100644
--- a/workspaces/github/plugins/github-issues/src/hooks/useEntityGithubRepositories.ts
+++ b/workspaces/github/plugins/github-issues/src/hooks/useEntityGithubRepositories.ts
@@ -31,8 +31,11 @@ export const getProjectNameFromEntity = (entity: Entity): string => {
 };
 
 export const getHostnameFromEntity = (entity: Entity): string => {
-  const { target } = getEntitySourceLocation(entity);
-  return new URL(target).hostname;
+  const { type, target } = getEntitySourceLocation(entity);
+  if (type === 'url') {
+    return new URL(target).hostname;
+  }
+  return 'github.com';
 };
 
 export function useEntityGithubRepositories() {