diff --git a/common/cosmwasm-smart-contracts/mixnet-contract/src/error.rs b/common/cosmwasm-smart-contracts/mixnet-contract/src/error.rs
index 39dab44263..e76a4f3e28 100644
--- a/common/cosmwasm-smart-contracts/mixnet-contract/src/error.rs
+++ b/common/cosmwasm-smart-contracts/mixnet-contract/src/error.rs
@@ -1,8 +1,9 @@
 // Copyright 2022-2023 - Nym Technologies SA <contact@nymtech.net>
 // SPDX-License-Identifier: Apache-2.0
 
-use crate::{EpochEventId, EpochState, IdentityKey, MixId};
+use crate::{EpochEventId, EpochState, IdentityKey, MixId, ProfitMarginRange};
 use contracts_common::signing::verifier::ApiVerifierError;
+use contracts_common::Percent;
 use cosmwasm_std::{Addr, Coin, Decimal, Uint128};
 use thiserror::Error;
 
@@ -240,6 +241,12 @@ pub enum MixnetContractError {
 
     #[error("this delegation has not been performed with the vesting tokens or has already been migrated")]
     NotAVestingDelegation,
+
+    #[error("the provided profit margin ({provided}) is outside the allowed range: {range}")]
+    ProfitMarginOutsideRange {
+        provided: Percent,
+        range: ProfitMarginRange,
+    },
 }
 
 impl MixnetContractError {
diff --git a/common/cosmwasm-smart-contracts/mixnet-contract/src/types.rs b/common/cosmwasm-smart-contracts/mixnet-contract/src/types.rs
index b412997088..ddcbb9326b 100644
--- a/common/cosmwasm-smart-contracts/mixnet-contract/src/types.rs
+++ b/common/cosmwasm-smart-contracts/mixnet-contract/src/types.rs
@@ -7,6 +7,7 @@ use contracts_common::Percent;
 use cosmwasm_schema::cw_serde;
 use cosmwasm_std::Addr;
 use cosmwasm_std::Coin;
+use std::fmt::{Display, Formatter};
 use std::ops::Index;
 
 // type aliases for better reasoning about available data
@@ -23,6 +24,12 @@ pub struct ProfitMarginRange {
     pub maximum: Percent,
 }
 
+impl Display for ProfitMarginRange {
+    fn fmt(&self, f: &mut Formatter<'_>) -> std::fmt::Result {
+        write!(f, "{} - {}", self.minimum, self.maximum)
+    }
+}
+
 impl Default for ProfitMarginRange {
     fn default() -> Self {
         ProfitMarginRange {
@@ -42,6 +49,10 @@ impl ProfitMarginRange {
             profit_margin
         }
     }
+
+    pub fn within_range(&self, profit_margin: Percent) -> bool {
+        profit_margin >= self.minimum && profit_margin <= self.maximum
+    }
 }
 
 /// Specifies layer assignment for the given mixnode.
diff --git a/contracts/mixnet/src/mixnodes/transactions.rs b/contracts/mixnet/src/mixnodes/transactions.rs
index 703769365e..ab1aa9bd86 100644
--- a/contracts/mixnet/src/mixnodes/transactions.rs
+++ b/contracts/mixnet/src/mixnodes/transactions.rs
@@ -24,7 +24,7 @@ use crate::mixnodes::signature_helpers::verify_mixnode_bonding_signature;
 use crate::signing::storage as signing_storage;
 use crate::support::helpers::{
     ensure_bonded, ensure_epoch_in_progress_state, ensure_is_authorized, ensure_no_existing_bond,
-    ensure_no_pending_pledge_changes, validate_pledge,
+    ensure_no_pending_pledge_changes, ensure_profit_margin_within_range, validate_pledge,
 };
 
 use super::storage;
@@ -69,6 +69,9 @@ pub(crate) fn try_add_mixnode(
     cost_params: MixNodeCostParams,
     owner_signature: MessageSignature,
 ) -> Result<Response, MixnetContractError> {
+    // ensure the profit margin is within the defined range
+    ensure_profit_margin_within_range(deps.storage, cost_params.profit_margin_percent)?;
+
     // check if the pledge contains any funds of the appropriate denomination
     let minimum_pledge = mixnet_params_storage::minimum_mixnode_pledge(deps.storage)?;
     let pledge = validate_pledge(info.funds, minimum_pledge)?;
@@ -295,6 +298,9 @@ pub(crate) fn try_update_mixnode_cost_params(
 
     ensure_bonded(&existing_bond)?;
 
+    // ensure the profit margin is within the defined range
+    ensure_profit_margin_within_range(deps.storage, new_costs.profit_margin_percent)?;
+
     let cosmos_event = new_mixnode_pending_cost_params_update_event(
         existing_bond.mix_id,
         &info.sender,
diff --git a/contracts/mixnet/src/support/helpers.rs b/contracts/mixnet/src/support/helpers.rs
index 1b03a238be..0d8b679d3f 100644
--- a/contracts/mixnet/src/support/helpers.rs
+++ b/contracts/mixnet/src/support/helpers.rs
@@ -7,6 +7,7 @@ use cosmwasm_std::{Addr, BankMsg, Coin, CosmosMsg, Response, Storage};
 use mixnet_contract_common::error::MixnetContractError;
 use mixnet_contract_common::mixnode::PendingMixNodeChanges;
 use mixnet_contract_common::{EpochState, EpochStatus, IdentityKeyRef, MixNodeBond};
+use nym_contracts_common::Percent;
 
 // helper trait to attach `Msg` to a response if it's provided
 #[allow(dead_code)]
@@ -267,3 +268,18 @@ pub(crate) fn decode_ed25519_identity_key(
 
     Ok(public_key)
 }
+
+pub(crate) fn ensure_profit_margin_within_range(
+    storage: &dyn Storage,
+    profit_margin: Percent,
+) -> Result<(), MixnetContractError> {
+    let range = mixnet_params_storage::profit_margin_range(storage)?;
+    if !range.within_range(profit_margin) {
+        return Err(MixnetContractError::ProfitMarginOutsideRange {
+            provided: profit_margin,
+            range,
+        });
+    }
+
+    Ok(())
+}