diff --git a/app/models/issue.rb b/app/models/issue.rb
index 3fc57757d361ab4538c2742a68eaf27a085bd483..4d3b2e644fb791962d750804be25dfd5d43aa4af 100644
--- a/app/models/issue.rb
+++ b/app/models/issue.rb
@@ -575,10 +575,10 @@ def blocked_for_repositioning?
   end
 
   # `from` argument can be a Namespace or Project.
-  def to_reference(from = nil, full: false)
+  def to_reference(from = nil, full: false, absolute_path: false)
     reference = "#{self.class.reference_prefix}#{iid}"
 
-    "#{namespace.to_reference_base(from, full: full)}#{reference}"
+    "#{namespace.to_reference_base(from, full: full, absolute_path: absolute_path)}#{reference}"
   end
 
   def suggested_branch_name
@@ -817,7 +817,35 @@ def hook_attrs
 
   override :gfm_reference
   def gfm_reference(from = nil)
-    "#{work_item_type_with_default.name.underscore} #{to_reference(from)}"
+    # References can be ambiguous when two namespaces have the same path names. This is why we need to use absolute
+    # paths when cross-referencing between projects and groups.
+    #
+    # Example setup:
+    #  - `gitlab` group
+    #  - `gitlab` project within the `gitlab` group
+    #  - In a project issue, we reference an epic with `epic gitlab#123` for a system note
+    #
+    # When resolving this system note, we would look for a namespace within the `gitlab` project's parent.
+    # This would be incorrect, as it would resolve to an ISSUE on the `gitlab` PROJECT, not the `gitlab` GROUP.
+    #
+    # This problem only occurs when there is a project with the same name as the group. Otherwise, our reference
+    # code attempts to resolve it on the group.
+    #
+    # Since the reference parser has no information about where each reference originated, we need to fix this in
+    # the reference itself by providing an absolute path.
+    #
+    # In the example above, the `from` argument is the Issue on the Project, and `self` is the item on the Group.
+    # Every time we reference from a project to a group, we need to use an absolute path.
+    # So we need to reference it as `epic /gitlab#123`.
+    #
+    # We could always use absolute paths to remove the ambiguity, but this would lead to longer references everywhere
+    # that are harder to read.
+    params = {}
+    if (from.is_a?(Project) || from.is_a?(Namespaces::ProjectNamespace)) && group_level?
+      params = { full: true, absolute_path: true }
+    end
+
+    "#{work_item_type_with_default.name.underscore} #{to_reference(from, **params)}"
   end
 
   def skip_metrics?
diff --git a/ee/spec/services/ee/system_notes/issuables_service_spec.rb b/ee/spec/services/ee/system_notes/issuables_service_spec.rb
index 2019261c0884d11d1feab1b0a964c8e90b4f80e5..1c860f75fb3c563ad5852d02db6271a753939d4e 100644
--- a/ee/spec/services/ee/system_notes/issuables_service_spec.rb
+++ b/ee/spec/services/ee/system_notes/issuables_service_spec.rb
@@ -316,6 +316,8 @@
   describe '#cross_reference' do
     let(:mentioned_in) { create(:issue, project: project) }
 
+    let(:new_note) { service.cross_reference(mentioned_in) }
+
     subject { service.cross_reference(mentioned_in) }
 
     context 'when noteable is an epic' do
@@ -333,6 +335,37 @@
       end
     end
 
+    context 'with project and group having the same path name' do
+      using RSpec::Parameterized::TableSyntax
+
+      let_it_be_with_reload(:group) { create(:group, path: 'same-name') }
+      let_it_be_with_reload(:project) { create(:project, path: 'same-name', group: group) }
+      let_it_be_with_reload(:noteable) { create(:issue, project: project) }
+
+      let_it_be(:issue) { create(:issue, project: project, iid: 100) }
+      let_it_be(:issue_2) { create(:issue, project: project, iid: 101) }
+      let_it_be(:epic) { create(:epic, group: group, iid: 100) }
+      let_it_be(:epic_work_item) { create(:work_item, :epic, namespace: group, iid: 101) }
+      let_it_be(:merge_request) { create(:merge_request, source_project: project, iid: 100) }
+
+      let(:service) { described_class.new(noteable: noteable, container: group, author: author) }
+
+      where(:mentioned_in, :notable, :type) do
+        ref(:epic) | ref(:issue) | 'epic'
+        ref(:epic) | ref(:merge_request) | 'epic'
+        ref(:issue) | ref(:merge_request) | 'issue'
+        ref(:epic_work_item) | ref(:issue) | 'epic'
+        ref(:epic_work_item) | ref(:merge_request) | 'epic'
+        ref(:merge_request) | ref(:epic_work_item) | 'merge request'
+      end
+
+      with_them do
+        it 'has the correct link' do
+          expect(new_note.note_html).to include(::Gitlab::UrlBuilder.build(mentioned_in, only_path: true))
+        end
+      end
+    end
+
     context 'when notable is not an epic' do
       it 'does not tracks epic cross reference event in usage ping' do
         expect(::Gitlab::UsageDataCounters::EpicActivityUniqueCounter).not_to receive(:track_epic_cross_referenced)
diff --git a/spec/models/issue_spec.rb b/spec/models/issue_spec.rb
index 5585e799761d1d344e010324e35a4be99a7d5416..928c1d51a9f65b9c73a8c083b72a9828f5f0a917 100644
--- a/spec/models/issue_spec.rb
+++ b/spec/models/issue_spec.rb
@@ -1862,6 +1862,25 @@
         expect(issue.gfm_reference).to eq("#{expected_name} #{issue.to_reference}")
       end
     end
+
+    context 'when referencing a group level issue' do
+      let_it_be(:group) { create(:group) }
+      let_it_be(:group_issue) { create(:issue, :group_level, namespace: group) }
+      let_it_be(:group_issue2) { create(:issue, :group_level, namespace: group) }
+      let_it_be(:issue) { create(:issue) }
+
+      it 'uses uses an absolute path when reference comes from a project' do
+        expect(group_issue.gfm_reference(issue.project)).to eq("issue /#{group.full_path}##{group_issue.iid}")
+      end
+
+      it 'uses uses an absolute path when reference comes from a project namespace' do
+        expect(group_issue.gfm_reference(issue.namespace)).to eq("issue /#{group.full_path}##{group_issue.iid}")
+      end
+
+      it 'does not use an absolute path when reference comes from a group' do
+        expect(group_issue.gfm_reference(group)).to eq("issue ##{group_issue.iid}")
+      end
+    end
   end
 
   describe '#has_widget?' do