diff --git a/CHANGELOG.rst b/CHANGELOG.rst
index 1fc5056b..279ca941 100644
--- a/CHANGELOG.rst
+++ b/CHANGELOG.rst
@@ -21,6 +21,8 @@ Fixed
 - ``adapt_class_type`` used a locally defined `partial_instance` wrapper
   function that is not pickleable (`#728
   <https://github.com/omni-us/jsonargparse/pull/728>`__).
+- ArgumentParser with dashes incorrectly resolves paths to default values (`#736
+  <https://github.com/omni-us/jsonargparse/pull/736>`__).
 
 
 v4.40.0 (2025-05-16)
diff --git a/jsonargparse/_core.py b/jsonargparse/_core.py
index 0dcc3b29..2c92ef16 100644
--- a/jsonargparse/_core.py
+++ b/jsonargparse/_core.py
@@ -201,6 +201,7 @@ def set_defaults(self, *args: Dict[str, Any], **kwargs: Any) -> None:
         """
         for arg in args:
             for dest, default in arg.items():
+                dest = dest.replace("-", "_")
                 action = _find_action(self, dest)
                 if action is None:
                     raise NSKeyError(f'No action for key "{dest}" to set its default.')
@@ -458,7 +459,7 @@ def parse_args(  # type: ignore[override]
                 cfg, unk = self.parse_known_args(args=args, namespace=cfg)
                 cfg, unk = self._positional_optionals(cfg, unk)
             if unk:
-                self.error(f'Unrecognized arguments: {" ".join(unk)}')
+                self.error(f"Unrecognized arguments: {' '.join(unk)}")
 
             parsed_cfg = self._parse_common(
                 cfg=cfg,
diff --git a/jsonargparse_tests/test_dataclass_like.py b/jsonargparse_tests/test_dataclass_like.py
index e8fdf548..6ee90059 100644
--- a/jsonargparse_tests/test_dataclass_like.py
+++ b/jsonargparse_tests/test_dataclass_like.py
@@ -116,6 +116,16 @@ class NestedDefaultsB:
     a: List[NestedDefaultsA]
 
 
+@dataclasses.dataclass
+class NestedDefaultsC:
+    field_with_dash: int = 5
+
+
+@dataclasses.dataclass
+class NestedDefaultsD:
+    c_with_dash: NestedDefaultsC = dataclasses.field(default_factory=NestedDefaultsC)
+
+
 def test_add_dataclass_nested_defaults(parser):
     parser.add_class_arguments(NestedDefaultsB, "data")
     cfg = parser.parse_args(["--data.a=[{}]"])
@@ -989,6 +999,18 @@ def test_nested_dict(self, parser):
         assert isinstance(init.model, PydanticNestedDict)
         assert isinstance(init.model.nested["key"], NestedModel)
 
+    def test_dashes_in_nested_dataclass(self):
+        class UnderscoresToDashesParser(ArgumentParser):
+            def add_argument(self, *args, **kwargs):
+                args = [arg.replace("_", "-") for arg in args]
+                return super().add_argument(*args, **kwargs)
+
+        parser = UnderscoresToDashesParser(parse_as_dict=False, default_env=True)
+        parser.add_class_arguments(NestedDefaultsD)
+        ns = parser.parse_args([])
+        cfg = parser.instantiate_classes(ns)
+        assert cfg.c_with_dash.field_with_dash == 5
+
 
 # attrs tests