diff --git a/setup.py b/setup.py
index 929a8ee5..33e23798 100644
--- a/setup.py
+++ b/setup.py
@@ -37,7 +37,7 @@
         "requests",
         "toml>=0.10.0",  # for oca-towncrier
         "tomli ; python_version < '3.11'",  # from 3.11 tomllib is in stdlib
-        "towncrier>=21.3",  # for oca-towncrier
+        "towncrier>=23.0",  # for oca-towncrier
         "selenium",
         "twine",
         "wheel",
diff --git a/tests/test_towncrier.py b/tests/test_towncrier.py
index b0511d40..90334d68 100644
--- a/tests/test_towncrier.py
+++ b/tests/test_towncrier.py
@@ -10,13 +10,17 @@
 
 def test_make_issue_format():
     assert (
-        _make_issue_format("OCA", "repo")
+        _make_issue_format("OCA", "repo", "rst")
         == "`#{issue} <https://github.com/OCA/repo/issues/{issue}>`_"
     )
+    assert (
+        _make_issue_format("OCA", "repo", "md")
+        == "[#{issue}](https://github.com/OCA/repo/issues/{issue})"
+    )
 
 
 def test_prepare_config(tmp_path):
-    with _prepare_config(str(tmp_path), "OCA", "repo") as fn:
+    with _prepare_config(str(tmp_path), "OCA", "repo") as (fn, result_file):
         with open(fn) as f:
             pyproject = toml.load(f)
             assert set(pyproject["tool"]["towncrier"].keys()) == {
@@ -60,3 +64,37 @@ def test_oca_towncrier(tmp_path):
             - Bugfix description. (`#50 <https://github.com/OCA/therepo/issues/50>`_)
         """
     )
+
+
+def test_oca_towncrier_md(tmp_path):
+    addon_path = tmp_path / "addon_a"
+    readme_path = addon_path / "readme"
+    history_path = readme_path / "HISTORY.md"
+    news_path = readme_path / "newsfragments"
+    news_path.mkdir(parents=True)
+    (news_path / "50.bugfix").write_text("Bugfix description.")
+    (readme_path / "description.md").write_text("Some description")
+    runner = CliRunner()
+    runner.invoke(
+        oca_towncrier,
+        [
+            "--addon-dir",
+            str(addon_path),
+            "--version",
+            "14.0.1.0.1",
+            "--date",
+            "2021-12-31",
+            "--repo",
+            "therepo",
+        ],
+    )
+    assert history_path.exists()
+    assert history_path.read_text() == textwrap.dedent(
+        """\
+            ## 14.0.1.0.1 (2021-12-31)
+
+            #### Bugfixes
+
+            - Bugfix description. ([#50](https://github.com/OCA/therepo/issues/50))
+        """
+    )
diff --git a/tools/oca_towncrier.py b/tools/oca_towncrier.py
index 08c4ff96..00456aab 100644
--- a/tools/oca_towncrier.py
+++ b/tools/oca_towncrier.py
@@ -16,34 +16,62 @@
 from .manifest import read_manifest
 
 
-def _make_issue_format(org, repo):
-    return "`#{{issue}} <https://github.com/{org}/{repo}/issues/{{issue}}>`_".format(
-        org=org, repo=repo
+def _make_issue_format(org, repo, fragment_format):
+    if fragment_format == "md":
+        return f"[#{{issue}}](https://github.com/{org}/{repo}/issues/{{issue}})"
+    return f"`#{{issue}} <https://github.com/{org}/{repo}/issues/{{issue}}>`_"
+
+
+def _get_towncrier_template(fragment_format):
+    return os.path.join(
+        os.path.dirname(__file__), f"towncrier-template.{fragment_format}"
     )
 
 
-def _get_towncrier_template():
-    return os.path.join(os.path.dirname(__file__), "towncrier-template.rst")
+def _get_readme_fragment_format(addon_dir):
+    """Detect the format of the readme fragment to generate (md or rst)"""
+    fragment_format = "rst"
+    readme_dir = os.path.join(addon_dir, "readme")
+    if not os.path.isdir(readme_dir):
+        return fragment_format
+    files = os.listdir(readme_dir)
+    files = [
+        f
+        for f in files
+        if not f.startswith(".") and os.path.isfile(os.path.join(readme_dir, f))
+    ]
+    # The first file found with a .md or .rst extension will determine the format
+    for f in files:
+        if f.endswith(".md"):
+            fragment_format = "md"
+            break
+        if f.endswith(".rst"):
+            fragment_format = "rst"
+            break
+    return fragment_format
 
 
 @contextlib.contextmanager
 def _prepare_config(addon_dir, org, repo):
     """Inject towncrier options in pyproject.toml"""
+    # first detect expected format (we support both md and rst)
+    fragment_format = _get_readme_fragment_format(addon_dir)
     with tempfile.NamedTemporaryFile(dir=addon_dir, mode="w") as config_file:
+        result_file = os.path.join("readme", f"HISTORY.{fragment_format}")
         config = {
             "tool": {
                 "towncrier": {
-                    "template": _get_towncrier_template(),
-                    "underlines": ["~"],
-                    "issue_format": _make_issue_format(org, repo),
+                    "template": _get_towncrier_template(fragment_format),
+                    "underlines": ["~" if fragment_format == "rst" else ""],
+                    "issue_format": _make_issue_format(org, repo, fragment_format),
                     "directory": "readme/newsfragments",
-                    "filename": "readme/HISTORY.rst",
+                    "filename": result_file,
                 }
             }
         }
         toml.dump(config, config_file)
         config_file.flush()
-        yield config_file.name
+        yield config_file.name, result_file
 
 
 @click.command(
@@ -82,7 +110,7 @@ def oca_towncrier(addon_dirs, version, date, org, repo, commit):
         if not any(not f.startswith(".") for f in os.listdir(news_dir)):
             continue
         addon_version = version or read_manifest(addon_dir)["version"]
-        with _prepare_config(addon_dir, org, repo) as config_file_name:
+        with _prepare_config(addon_dir, org, repo) as (config_file_name, result_file):
             subprocess.call(
                 [
                     sys.executable,
@@ -99,7 +127,7 @@ def oca_towncrier(addon_dirs, version, date, org, repo, commit):
                 cwd=addon_dir,
             )
         paths.append(news_dir)
-        paths.append(os.path.join(addon_dir, "readme", "HISTORY.rst"))
+        paths.append(os.path.join(addon_dir, result_file))
     if commit:
         commit_if_needed(paths, message="[UPD] changelog", add=False)
 
diff --git a/tools/towncrier-template.md b/tools/towncrier-template.md
new file mode 100644
index 00000000..41773757
--- /dev/null
+++ b/tools/towncrier-template.md
@@ -0,0 +1,65 @@
+{% if render_title %}
+{% if versiondata.name %}
+## {{ versiondata.name }} {{ versiondata.version }} ({{ versiondata.date }})
+{% else %}
+## {{ versiondata.version }} ({{ versiondata.date }})
+{% endif %}
+{% endif %}
+{% for section, _ in sections.items() %}
+{% if section %}
+
+### {{section}}
+{% endif %}
+
+{% if sections[section] %}
+{% for category, val in definitions.items() if category in sections[section] %}
+#### {{ definitions[category]['name'] }}
+
+{% if definitions[category]['showcontent'] %}
+{% for text, values in sections[section][category].items() %}
+- {{ text }}
+{%- if values %}
+{% if "\n  - " in text or '\n  * ' in text %}
+
+
+  (
+{%- else %}
+ (
+{%- endif -%}
+{%- for issue in values %}
+{{ issue.split(": ", 1)[0] }}{% if not loop.last %}, {% endif %}
+{%- endfor %}
+)
+{% else %}
+
+{% endif %}
+{% endfor %}
+
+{% else %}
+- {% for issue in sections[section][category][''] %}
+{{ issue.split(": ", 1)[0] }}{% if not loop.last %}, {% endif %}
+{% endfor %}
+
+
+{% endif %}
+{% if issues_by_category[section][category] and "]: " in issues_by_category[section][category][0] %}
+{% for issue in issues_by_category[section][category] %}
+{{ issue }}
+{% endfor %}
+
+{% endif %}
+{% if sections[section][category]|length == 0 %}
+No significant changes.
+
+{% else %}
+{% endif %}
+{% endfor %}
+{% else %}
+No significant changes.
+
+{% endif %}
+{% endfor +%}
+{#
+This comment adds one more newline at the end of the rendered newsfile content.
+In this way the there are 2 newlines between the latest release and the previous release content.
+#}