diff --git a/CMakeLists.txt b/CMakeLists.txt
index 9ed7c18733..bc95d53ee0 100644
--- a/CMakeLists.txt
+++ b/CMakeLists.txt
@@ -454,7 +454,7 @@ foreach(module_name ${ZEPHYR_MODULE_NAMES})
   # this binary_dir is created but stays empty. Object files land in
   # the main binary dir instead.
   # https://cmake.org/pipermail/cmake/2019-June/069547.html
-  string(TOUPPER ${module_name} MODULE_NAME_UPPER)
+  zephyr_string(SANITIZE TOUPPER MODULE_NAME_UPPER ${module_name})
   if(NOT ${ZEPHYR_${MODULE_NAME_UPPER}_CMAKE_DIR} STREQUAL "")
     set(ZEPHYR_CURRENT_MODULE_DIR ${ZEPHYR_${MODULE_NAME_UPPER}_MODULE_DIR})
     set(ZEPHYR_CURRENT_CMAKE_DIR ${ZEPHYR_${MODULE_NAME_UPPER}_CMAKE_DIR})
diff --git a/cmake/extensions.cmake b/cmake/extensions.cmake
index c70eac0dc6..47e100f50a 100644
--- a/cmake/extensions.cmake
+++ b/cmake/extensions.cmake
@@ -1960,6 +1960,47 @@ Relative paths are only allowed with `-D${ARGV1}=<path>`")
   endif()
 endfunction()
 
+# Usage:
+#   zephyr_string(<mode> <out-var> <input> ...)
+#
+# Zephyr string function extension.
+# This function extends the CMake string function by providing additional
+# manipulation arguments to CMake string.
+#
+# SANITIZE: Ensure that the output string does not contain any special
+#           characters. Special characters, such as -, +, =, $, etc. are
+#           converted to underscores '_'.
+#
+# SANITIZE TOUPPER: Ensure that the output string does not contain any special
+#                   characters. Special characters, such as -, +, =, $, etc. are
+#                   converted to underscores '_'.
+#                   The sanitized string will be returned in UPPER case.
+#
+# returns the updated string
+function(zephyr_string)
+  set(options SANITIZE TOUPPER)
+  cmake_parse_arguments(ZEPHYR_STRING "${options}" "" "" ${ARGN})
+
+  if (NOT ZEPHYR_STRING_UNPARSED_ARGUMENTS)
+    message(FATAL_ERROR "Function zephyr_string() called without a return variable")
+  endif()
+
+  list(GET ZEPHYR_STRING_UNPARSED_ARGUMENTS 0 return_arg)
+  list(REMOVE_AT ZEPHYR_STRING_UNPARSED_ARGUMENTS 0)
+
+  list(JOIN ZEPHYR_STRING_UNPARSED_ARGUMENTS "" work_string)
+
+  if(ZEPHYR_STRING_SANITIZE)
+    string(REGEX REPLACE "[^a-zA-Z0-9_]" "_" work_string ${work_string})
+  endif()
+
+  if(ZEPHYR_STRING_TOUPPER)
+    string(TOUPPER ${work_string} work_string)
+  endif()
+
+  set(${return_arg} ${work_string} PARENT_SCOPE)
+endfunction()
+
 # Usage:
 #   zephyr_check_cache(<variable> [REQUIRED])
 #
diff --git a/cmake/kconfig.cmake b/cmake/kconfig.cmake
index 1442e356d0..5cffa64c41 100644
--- a/cmake/kconfig.cmake
+++ b/cmake/kconfig.cmake
@@ -69,7 +69,7 @@ string(REPLACE ";" "?" DTS_ROOT_BINDINGS "${DTS_ROOT_BINDINGS}")
 # This allows Kconfig files to refer relative from a modules root as:
 # source "$(ZEPHYR_FOO_MODULE_DIR)/Kconfig"
 foreach(module_name ${ZEPHYR_MODULE_NAMES})
-  string(TOUPPER ${module_name} MODULE_NAME_UPPER)
+  zephyr_string(SANITIZE TOUPPER MODULE_NAME_UPPER ${module_name})
   list(APPEND
        ZEPHYR_KCONFIG_MODULES_DIR
        "ZEPHYR_${MODULE_NAME_UPPER}_MODULE_DIR=${ZEPHYR_${MODULE_NAME_UPPER}_MODULE_DIR}"
diff --git a/cmake/zephyr_module.cmake b/cmake/zephyr_module.cmake
index 43230a1229..8c6735586e 100644
--- a/cmake/zephyr_module.cmake
+++ b/cmake/zephyr_module.cmake
@@ -104,7 +104,7 @@ if(WEST OR ZEPHYR_MODULES)
 
       list(APPEND ZEPHYR_MODULE_NAMES ${module_name})
 
-      string(TOUPPER ${module_name} MODULE_NAME_UPPER)
+      zephyr_string(SANITIZE TOUPPER MODULE_NAME_UPPER ${module_name})
       if(NOT ${MODULE_NAME_UPPER} STREQUAL CURRENT)
         set(ZEPHYR_${MODULE_NAME_UPPER}_MODULE_DIR ${module_path})
         set(ZEPHYR_${MODULE_NAME_UPPER}_CMAKE_DIR ${cmake_path})
diff --git a/doc/guides/modules.rst b/doc/guides/modules.rst
index 7a8873756c..3ace14825a 100644
--- a/doc/guides/modules.rst
+++ b/doc/guides/modules.rst
@@ -421,6 +421,13 @@ CMake variable ``ZEPHYR_<MODULE_NAME>_MODULE_DIR`` and the variable
 ``ZEPHYR_<MODULE_NAME>_CMAKE_DIR`` holds the location of the directory
 containing the module's :file:`CMakeLists.txt` file.
 
+.. note::
+   When used for CMake and Kconfig variables, all letters in module names are
+   converted to uppercase and all non-alphanumeric characters are converted
+   to underscores (_).
+   As example, the module ``foo-bar`` must be referred to as
+   ``ZEPHYR_FOO_BAR_MODULE_DIR`` in CMake and Kconfig.
+
 Here is an example for the Zephyr module ``foo``:
 
 .. code-block:: yaml
diff --git a/modules/modules.cmake b/modules/modules.cmake
index 8f849c2cc7..0242b9d5b1 100644
--- a/modules/modules.cmake
+++ b/modules/modules.cmake
@@ -5,7 +5,8 @@ file(GLOB cmake_modules "${CMAKE_CURRENT_LIST_DIR}/*/CMakeLists.txt")
 foreach(module ${cmake_modules})
   get_filename_component(module_dir  ${module} DIRECTORY)
   get_filename_component(module_name ${module_dir} NAME)
-  string(TOUPPER ${module_name} MODULE_NAME_UPPER)
+  zephyr_string(SANITIZE TOUPPER MODULE_NAME_UPPER ${module_name})
+
   set(ZEPHYR_${MODULE_NAME_UPPER}_CMAKE_DIR ${module_dir})
 endforeach()
 
@@ -14,6 +15,7 @@ file(GLOB kconfig_modules "${CMAKE_CURRENT_LIST_DIR}/*/Kconfig")
 foreach(module ${kconfig_modules})
   get_filename_component(module_dir  ${module} DIRECTORY)
   get_filename_component(module_name ${module_dir} NAME)
-  string(TOUPPER ${module_name} MODULE_NAME_UPPER)
+  zephyr_string(SANITIZE TOUPPER MODULE_NAME_UPPER ${module_name})
+
   set(ZEPHYR_${MODULE_NAME_UPPER}_KCONFIG ${module_dir}/Kconfig)
 endforeach()
diff --git a/scripts/ci/check_compliance.py b/scripts/ci/check_compliance.py
index 76906bcb02..85c438e6a5 100755
--- a/scripts/ci/check_compliance.py
+++ b/scripts/ci/check_compliance.py
@@ -262,7 +262,7 @@ class KconfigCheck(ComplianceTest):
         with open(modules_file, 'w') as fp_module_file:
             for module in modules:
                 fp_module_file.write("ZEPHYR_{}_KCONFIG = {}\n".format(
-                    module.upper(),
+                    re.sub('[^a-zA-Z0-9]', '_', module).upper(),
                     modules_dir + '/' + module + '/Kconfig'
                 ))
             fp_module_file.write(content)
diff --git a/scripts/zephyr_module.py b/scripts/zephyr_module.py
index 8725095ae3..18dedaf852 100755
--- a/scripts/zephyr_module.py
+++ b/scripts/zephyr_module.py
@@ -19,6 +19,7 @@ maintained in modules in addition to what is available in the main Zephyr tree.
 
 import argparse
 import os
+import re
 import sys
 import yaml
 import pykwalify.core
@@ -128,11 +129,13 @@ def process_module(module):
                      .format(module_yml.as_posix(), e))
 
         meta['name'] = meta.get('name', module_path.name)
+        meta['name-sanitized'] = re.sub('[^a-zA-Z0-9]', '_', meta['name'])
         return meta
 
     if Path(module_path.joinpath('zephyr/CMakeLists.txt')).is_file() and \
        Path(module_path.joinpath('zephyr/Kconfig')).is_file():
         return {'name': module_path.name,
+                'name-sanitized': re.sub('[^a-zA-Z0-9]', '_', module_path.name),
                 'build': {'cmake': 'zephyr', 'kconfig': 'zephyr/Kconfig'}}
 
     return None
@@ -148,7 +151,7 @@ def process_cmake(module, meta):
         return('\"{}\":\"{}\":\"{}\"\n'
                .format(meta['name'],
                        module_path.as_posix(),
-                       "${ZEPHYR_" + meta['name'].upper() + "_CMAKE_DIR}"))
+                       "${ZEPHYR_" + meta['name-sanitized'].upper() + "_CMAKE_DIR}"))
 
     cmake_setting = section.get('cmake', None)
     if not validate_setting(cmake_setting, module, 'CMakeLists.txt'):
@@ -185,11 +188,14 @@ def process_settings(module, meta):
     return out_text
 
 
-def kconfig_snippet(name, path, kconfig_file=None):
+def kconfig_snippet(meta, path, kconfig_file=None):
+    name = meta['name']
+    name_sanitized = meta['name-sanitized']
+
     snippet = (f'menu "{name} ({path})"',
                f'osource "{kconfig_file.resolve().as_posix()}"' if kconfig_file
-               else f'osource "$(ZEPHYR_{name.upper()}_KCONFIG)"',
-               f'config ZEPHYR_{name.upper()}_MODULE',
+               else f'osource "$(ZEPHYR_{name_sanitized.upper()}_KCONFIG)"',
+               f'config ZEPHYR_{name_sanitized.upper()}_MODULE',
                '	bool',
                '	default y',
                'endmenu\n')
@@ -202,7 +208,7 @@ def process_kconfig(module, meta):
     module_yml = module_path.joinpath('zephyr/module.yml')
     kconfig_extern = section.get('kconfig-ext', False)
     if kconfig_extern:
-        return kconfig_snippet(meta['name'], module_path)
+        return kconfig_snippet(meta, module_path)
 
     kconfig_setting = section.get('kconfig', None)
     if not validate_setting(kconfig_setting, module):
@@ -212,7 +218,7 @@ def process_kconfig(module, meta):
 
     kconfig_file = os.path.join(module, kconfig_setting or 'zephyr/Kconfig')
     if os.path.isfile(kconfig_file):
-        return kconfig_snippet(meta['name'], module_path, Path(kconfig_file))
+        return kconfig_snippet(meta, module_path, Path(kconfig_file))
     else:
         return ""