How to replace dash between characters with space using regex

Use references to capturing groups:

>>> original_term = 'ab-cd'
>>> re.sub(r"([A-z])\-([A-z])", r"\1 \2", original_term)
'ab cd'

This assumes, of course, that you can't just do original_term.replace('-', ' ') for whatever reason. Perhaps your text uses hyphens where it should use en dashes or something.

You need to capture the characters before and after the - to a group and use them for replacement, i.e.:

import re
subject = "ab-cd"
subject = re.sub(r"([a-z])\-([a-z])", r"\1 \2", subject , 0, re.IGNORECASE)
print subject
#ab cd

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DEMO

http://ideone.com/LAYQWT

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REGEX EXPLANATION

([A-z])\-([A-z])

Match the regex below and capture its match into backreference number 1 «([A-z])»
   Match a single character in the range between “A” and “z” «[A-z]»
Match the character “-” literally «\-»
Match the regex below and capture its match into backreference number 2 «([A-z])»
   Match a single character in the range between “A” and “z” «[A-z]»

\1 \2

Insert the text that was last matched by capturing group number 1 «\1»
Insert the character “ ” literally « »
Insert the text that was last matched by capturing group number 2 «\2»

re.sub() always replaces the whole matched sequence with the replacement.

A solution to only replace the dash are lookahead and lookbehind assertions. They don't count to the matched sequence.

new_term = re.sub(r"(?<=[A-z])\-(?=[A-z])", " ", original_term)

The syntax is explained in the Python documentation for the re module.