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The paper deals with the insertion of spaces and hyphens in German. It summarizes the existing optimality-theoretic approach and extends it to capture the use of hyphens. Hyphenation is often excluded in the literature on the writing of complex words, as forms with hyphens are thought to be mere variants of solid forms. The paper offers an alternative view in which hyphens are treated as an intermediate form between solid and open forms and are placed as a result of conflict between constraints which demand or forbid insertion of spaces. The analysis focuses on the products of nominal compounding, which is one of the most productive processes of word formation in German. Firstly, it is shown for which types of compounds hyphenation is optional and obligatory according to the official rules of orthography. Based on this, constraints are postulated, which do not only decide in which cases hyphenation is allowed but also in which positions the hyphens must be placed in the respective compound. Finally, the hyphenation of phrasal compounds and other complex compounds is modeled.

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