diff --git a/CHANGELOG.md b/CHANGELOG.md
index 7f2d752ab5..0eeb87cfaa 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -14,6 +14,10 @@ If you want to disable this behavior, you can config it in dfx.json:
         }
     }
 
+### fix: Valid canister-based env vars
+
+Hyphens are not valid in shell environment variables, but do occur in canister names such as `smiley-dapp`. This poses a problem for vars with names such as `CANISTER_ID_${CANISTER_NAME}`.  With this change, hyphens are replaced with underscores in environment variables.  The canister id of `smiley-dapp` will be available as `CANISTER_ID_smiley_dapp`.  Other environment variables are unaffected.
+
 ### feat: Add dfx sns deploy
 
 This allows users to deploy a set of SNS canisters.
diff --git a/docs/cli-reference/dfx-envars.md b/docs/cli-reference/dfx-envars.md
index e8d35dbd40..edf0f37a13 100644
--- a/docs/cli-reference/dfx-envars.md
+++ b/docs/cli-reference/dfx-envars.md
@@ -16,9 +16,9 @@ For example, if you have a `whoami_frontend` canister that lists `whoami` under
 
 ## CANISTER_ID\_{canister.name}
 
-Use environment variables with the `CANISTER_ID` prefix to reference the canister identifier for each canister in the `dfx.json` file for your project.
+Use environment variables with the `CANISTER_ID` prefix to reference the canister identifier for each canister in the `dfx.json` file for your project.  Hyphens are invalid in environment variables and are replaced by underscores.
 
-For example, if you have a `linkedup` project that consists of the `linkedup` and `connectd` canisters, you could use the `CANISTER_ID_linkedup` and `CANISTER_ID_connectd` environment variables to refer to the canister identifiers—for example `ryjl3-tyaaa-aaaaa-aaaba-cai` and `rrkah-fqaaa-aaaaa-aaaaq-cai`—created for your project.
+For example, if you have a `linkedup` project that consists of the `linkedup` and `connect-d` canisters, you could use the `CANISTER_ID_linkedup` and `CANISTER_ID_connect_d` environment variables to refer to the canister identifiers—for example `ryjl3-tyaaa-aaaaa-aaaba-cai` and `rrkah-fqaaa-aaaaa-aaaaq-cai`—created for your project.
 
 ## DFX_CONFIG_ROOT
 
diff --git a/src/dfx/src/lib/builders/mod.rs b/src/dfx/src/lib/builders/mod.rs
index a45bd71a70..da19322364 100644
--- a/src/dfx/src/lib/builders/mod.rs
+++ b/src/dfx/src/lib/builders/mod.rs
@@ -316,14 +316,20 @@ pub fn environment_variables<'a>(
             };
 
             vars.push((
-                Owned(format!("CANISTER_CANDID_PATH_{}", canister.get_name())),
+                Owned(format!(
+                    "CANISTER_CANDID_PATH_{}",
+                    canister.get_name().replace('-', "_")
+                )),
                 Borrowed(candid_path),
             ));
         }
     }
     for canister in pool.get_canister_list() {
         vars.push((
-            Owned(format!("CANISTER_ID_{}", canister.get_name())),
+            Owned(format!(
+                "CANISTER_ID_{}",
+                canister.get_name().replace('-', "_")
+            )),
             Owned(canister.canister_id().to_text().into()),
         ));
     }