diff --git a/examples/nft-nd-nns/nns.go b/examples/nft-nd-nns/nns.go
index dd07ff66c..529f24f88 100644
--- a/examples/nft-nd-nns/nns.go
+++ b/examples/nft-nd-nns/nns.go
@@ -507,6 +507,8 @@ func checkCommittee() {
 }
 
 // checkFragment validates root or a part of domain name.
+// 1. Root domain must start with a letter.
+// 2. All other fragments must start and end in a letter or a digit.
 func checkFragment(v string, isRoot bool) bool {
 	maxLength := maxDomainNameFragmentLength
 	if isRoot {
@@ -525,12 +527,12 @@ func checkFragment(v string, isRoot bool) bool {
 			return false
 		}
 	}
-	for i := 1; i < len(v); i++ {
-		if !isAlNum(v[i]) {
+	for i := 1; i < len(v)-1; i++ {
+		if v[i] != '-' && !isAlNum(v[i]) {
 			return false
 		}
 	}
-	return true
+	return isAlNum(v[len(v)-1])
 }
 
 // isAlNum checks whether provided char is a lowercase letter or a number.
diff --git a/examples/nft-nd-nns/nns_test.go b/examples/nft-nd-nns/nns_test.go
index 1e80ed7ce..38c10f9af 100644
--- a/examples/nft-nd-nns/nns_test.go
+++ b/examples/nft-nd-nns/nns_test.go
@@ -173,11 +173,17 @@ func TestRegisterAndRenew(t *testing.T) {
 	c.Invoke(t, false, "register", "neo.com", e.CommitteeHash)
 	c.Invoke(t, false, "isAvailable", "neo.com")
 
+	t.Run("domain names with hyphen", func(t *testing.T) {
+		c.InvokeFail(t, "invalid domain name format", "register", "-testdomain.com", e.CommitteeHash)
+		c.InvokeFail(t, "invalid domain name format", "register", "testdomain-.com", e.CommitteeHash)
+		c.Invoke(t, true, "register", "test-domain.com", e.CommitteeHash)
+	})
+
 	props := stackitem.NewMap()
 	props.Add(stackitem.Make("name"), stackitem.Make("neo.com"))
 	props.Add(stackitem.Make("expiration"), stackitem.Make(expectedExpiration))
 	c.Invoke(t, props, "properties", "neo.com")
-	c.Invoke(t, 2, "balanceOf", e.CommitteeHash)
+	c.Invoke(t, 3, "balanceOf", e.CommitteeHash)
 	c.Invoke(t, e.CommitteeHash.BytesBE(), "ownerOf", []byte("neo.com"))
 
 	t.Run("invalid token ID", func(t *testing.T) {