diff --git a/.changeset/red-roses-speak.md b/.changeset/red-roses-speak.md
new file mode 100644
index 000000000..0896dba82
--- /dev/null
+++ b/.changeset/red-roses-speak.md
@@ -0,0 +1,5 @@
+---
+'@graphprotocol/graph-cli': patch
+---
+
+handle invalid characters in contract name #1883
diff --git a/packages/cli/src/command-helpers/subgraph.test.ts b/packages/cli/src/command-helpers/subgraph.test.ts
new file mode 100644
index 000000000..b3ac994e7
--- /dev/null
+++ b/packages/cli/src/command-helpers/subgraph.test.ts
@@ -0,0 +1,50 @@
+import { describe, expect, it } from 'vitest';
+import { formatContractName, formatSubgraphName, getSubgraphBasename } from './subgraph';
+
+describe('getSubgraphBasename', () => {
+  it('returns the last segment of a subgraph name', () => {
+    expect(getSubgraphBasename('user/my-subgraph')).toBe('my-subgraph');
+    expect(getSubgraphBasename('org/project')).toBe('project');
+  });
+
+  it('returns the full name if no slash is present', () => {
+    expect(getSubgraphBasename('single-name')).toBe('single-name');
+  });
+});
+
+describe('formatSubgraphName', () => {
+  it('converts to lowercase', () => {
+    expect(formatSubgraphName('MySubGraph')).toBe('mysubgraph');
+  });
+
+  it('replaces spaces with hyphens', () => {
+    expect(formatSubgraphName('my subgraph name')).toBe('my-subgraph-name');
+    expect(formatSubgraphName('multiple   spaces')).toBe('multiple-spaces');
+  });
+
+  it('removes special characters', () => {
+    expect(formatSubgraphName('my$special@subgraph!')).toBe('myspecialsubgraph');
+  });
+
+  it('keeps alphanumeric characters, hyphens and underscores', () => {
+    expect(formatSubgraphName('my-subgraph_123')).toBe('my-subgraph_123');
+  });
+});
+
+describe('formatContractName', () => {
+  it('replaces spaces and dots with underscores', () => {
+    expect(formatContractName('My Contract')).toBe('My_Contract');
+    expect(formatContractName('contract.name')).toBe('contract_name');
+    expect(formatContractName('multiple...dots')).toBe('multiple_dots');
+  });
+
+  it('removes special characters but keeps alphanumeric, hyphens and underscores', () => {
+    expect(formatContractName('Contract$$$Name')).toBe('ContractName');
+    expect(formatContractName('My-Contract_123')).toBe('My-Contract_123');
+    expect(formatContractName('My Contract $$$$')).toBe('My_Contract_');
+  });
+
+  it('preserves case', () => {
+    expect(formatContractName('MyContractName')).toBe('MyContractName');
+  });
+});
diff --git a/packages/cli/src/command-helpers/subgraph.ts b/packages/cli/src/command-helpers/subgraph.ts
index 5ca396db5..2a72b58b3 100644
--- a/packages/cli/src/command-helpers/subgraph.ts
+++ b/packages/cli/src/command-helpers/subgraph.ts
@@ -9,3 +9,7 @@ export const formatSubgraphName = (slug: string) => {
     .replace(/\s+/g, '-')
     .replace(/[^a-z0-9_-]/g, '');
 };
+
+export const formatContractName = (contractName: string) => {
+  return contractName.replace(/[\s.]+/g, '_').replace(/[^a-zA-Z0-9_-]/g, '');
+};
diff --git a/packages/cli/src/commands/init.ts b/packages/cli/src/commands/init.ts
index 9bb408ff9..387a3234b 100644
--- a/packages/cli/src/commands/init.ts
+++ b/packages/cli/src/commands/init.ts
@@ -16,7 +16,11 @@ import { retryWithPrompt } from '../command-helpers/retry.js';
 import { generateScaffold, writeScaffold } from '../command-helpers/scaffold.js';
 import { sortWithPriority } from '../command-helpers/sort.js';
 import { withSpinner } from '../command-helpers/spinner.js';
-import { formatSubgraphName, getSubgraphBasename } from '../command-helpers/subgraph.js';
+import {
+  formatContractName,
+  formatSubgraphName,
+  getSubgraphBasename,
+} from '../command-helpers/subgraph.js';
 import { GRAPH_CLI_SHARED_HEADERS } from '../constants.js';
 import debugFactory from '../debug.js';
 import EthereumABI from '../protocols/ethereum/abi.js';
@@ -289,7 +293,7 @@ export default class InitCommand extends Command {
           indexEvents,
           network,
           subgraphName,
-          contractName: contractName || DEFAULT_CONTRACT_NAME,
+          contractName,
           node,
           startBlock,
           spkgPath,
@@ -351,7 +355,7 @@ export default class InitCommand extends Command {
           network: answers.network,
           source: answers.source,
           indexEvents: answers.indexEvents,
-          contractName: answers.contractName || DEFAULT_CONTRACT_NAME,
+          contractName: answers.contractName,
           node,
           startBlock: answers.startBlock,
           spkgPath: answers.spkgPath,
@@ -872,7 +876,7 @@ async function processInitForm(
       type: 'input',
       name: 'contractName',
       message: 'Contract name',
-      initial: () => initContractName || contractName || 'Contract',
+      initial: () => initContractName || contractName || DEFAULT_CONTRACT_NAME,
       skip: () => initFromExample !== undefined || !protocolInstance.hasContract() || isSubstreams,
       validate: value =>
         initFromExample !== undefined ||
@@ -1307,7 +1311,7 @@ async function initSubgraphFromContract(
           network,
           source,
           indexEvents,
-          contractName,
+          contractName: formatContractName(contractName || DEFAULT_CONTRACT_NAME),
           startBlock,
           node,
           spkgPath,