diff --git a/agentstack/cli/init.py b/agentstack/cli/init.py
index ef23981d..9c3cf67b 100644
--- a/agentstack/cli/init.py
+++ b/agentstack/cli/init.py
@@ -6,7 +6,7 @@
 
 from agentstack import conf, log
 from agentstack.exceptions import EnvironmentError
-from agentstack.utils import is_snake_case
+from agentstack.utils import clean_input, is_snake_case
 from agentstack import packaging
 from agentstack import frameworks
 from agentstack import generation
@@ -122,6 +122,9 @@ def init_project(
     if not slug_name:
         slug_name = prompt_slug_name()
 
+    # Keep the filesystem path aligned with the slug used by Cookiecutter.
+    slug_name = clean_input(slug_name)
+
     conf.set_path(conf.PATH / slug_name)
     # cookiecutter requires the directory to not exist
     assert not os.path.exists(conf.PATH), f"Directory already exists: {conf.PATH}"
diff --git a/agentstack/utils.py b/agentstack/utils.py
index cc2569ed..59d243f2 100644
--- a/agentstack/utils.py
+++ b/agentstack/utils.py
@@ -86,7 +86,8 @@ def open_yaml_file(path) -> dict:
 
 def clean_input(input_string):
     special_char_pattern = re.compile(r'[^a-zA-Z0-9\s_]')
-    return re.sub(special_char_pattern, '', input_string).lower().replace(' ', '_').replace('-', '_')
+    normalized_input = input_string.replace('-', '_')
+    return re.sub(special_char_pattern, '', normalized_input).lower().replace(' ', '_')
 
 
 def term_color(text: str, color: str) -> str:
@@ -131,4 +132,4 @@ def get_base_dir():
     except (RuntimeError, OSError, PermissionError):
         # In CI or when directory is not writable, use temp directory
         base_dir = Path(os.getenv('TEMP', '/tmp'))
-    return base_dir
\ No newline at end of file
+    return base_dir
diff --git a/tests/test_cli_init.py b/tests/test_cli_init.py
index 92ff999d..d917ab03 100644
--- a/tests/test_cli_init.py
+++ b/tests/test_cli_init.py
@@ -3,6 +3,8 @@
 from parameterized import parameterized
 from pathlib import Path
 import shutil
+import tempfile
+from unittest.mock import patch
 from cli_test_utils import run_cli
 from agentstack import conf
 from agentstack import frameworks
@@ -32,6 +34,29 @@ def test_init_command(self, template_name: str):
         self.assertEqual(result.returncode, 0)
         self.assertTrue((self.project_dir / 'test_project').exists())
 
+    def test_init_command_normalizes_hyphenated_project_name(self):
+        """The CLI path must match the normalized Cookiecutter project slug."""
+        with tempfile.TemporaryDirectory() as temp_dir:
+            original_path = conf.PATH
+            conf.set_path(temp_dir)
+            try:
+                with patch('agentstack.cli.init.require_uv'), \
+                    patch('agentstack.cli.init.welcome_message'), \
+                    patch('agentstack.cli.init.insert_template') as insert_template, \
+                    patch('agentstack.cli.init.packaging.create_venv'), \
+                    patch('agentstack.cli.init.packaging.install_project'), \
+                    patch('agentstack.cli.init.repo.init'), \
+                    patch('agentstack.cli.init.repo.find_parent_repo', return_value=None), \
+                    patch('agentstack.cli.init.repo.Transaction') as transaction:
+                    transaction.return_value.__enter__.return_value = transaction.return_value
+                    init_project(slug_name='test-project', template='empty', framework='crewai')
+
+                self.assertEqual(conf.PATH, Path(temp_dir) / 'test_project')
+                insert_template.assert_called_once()
+                self.assertEqual(insert_template.call_args.kwargs['name'], 'test_project')
+            finally:
+                conf.set_path(original_path)
+
     @parameterized.expand([(k, v) for k, v in frameworks.ALIASED_FRAMEWORKS.items()])
     def test_init_command_aliased_framework_empty_project(self, alias: str, framework: str):
         """Test the 'init' command with an aliased framework."""
diff --git a/tests/test_utils.py b/tests/test_utils.py
index a938c41c..52dfdf1a 100644
--- a/tests/test_utils.py
+++ b/tests/test_utils.py
@@ -21,6 +21,10 @@ def test_clean_input_remove_space(self):
         cleaned = clean_input('test project')
         self.assertEqual('test_project', cleaned)
 
+    def test_clean_input_normalize_hyphen(self):
+        cleaned = clean_input('test-project')
+        self.assertEqual('test_project', cleaned)
+
     def test_is_snake_case(self):
         assert is_snake_case("hello_world")
         assert not is_snake_case("HelloWorld")
@@ -69,4 +73,4 @@ def test_get_base_dir_writable(self, mock_user_data_dir):
         result = get_base_dir()
 
         self.assertIsInstance(result, Path)
-        self.assertTrue(result.is_absolute())
\ No newline at end of file
+        self.assertTrue(result.is_absolute())