diff --git a/multiversx_sdk/core/codec.py b/multiversx_sdk/core/codec.py
index 28b3f80d..74791f0a 100644
--- a/multiversx_sdk/core/codec.py
+++ b/multiversx_sdk/core/codec.py
@@ -7,7 +7,10 @@ def encode_unsigned_number(arg: int) -> bytes:
 
 
 def encode_signed_number(arg: int) -> bytes:
-    return arg.to_bytes(INTEGER_MAX_NUM_BYTES, byteorder="big", signed=True).lstrip(bytes([255]))
+    if arg == 0:
+        return b''
+    length = ((arg + (arg < 0)).bit_length() + 7 + 1) // 8
+    return arg.to_bytes(length, byteorder="big", signed=True)
 
 
 def decode_unsigned_number(arg: bytes) -> int:
diff --git a/multiversx_sdk/core/codec_test.py b/multiversx_sdk/core/codec_test.py
new file mode 100644
index 00000000..4ade2d2a
--- /dev/null
+++ b/multiversx_sdk/core/codec_test.py
@@ -0,0 +1,75 @@
+from multiversx_sdk.core import codec
+
+test_vectors_1 = [
+    [-1, 0xFF],
+    [1, 0x01],
+    [2, 0x02],
+    [-2, 0xFE],
+    [3, 0x03],
+    [-3, 0xFD],
+    [4, 0x04],
+    [-4, 0xFC],
+]
+
+test_vectors_2 = [
+    [-1, 0xFF],
+    [1, 0x01],
+    [2, 0x02],
+    [-2, 0xFE],
+    [3, 0x03],
+    [-3, 0xFD],
+    [4, 0x04],
+    [-4, 0xFC],
+    [5, 0x05],
+    [-5, 0xFB],
+    [6, 0x06],
+    [-6, 0xFA],
+]
+
+test_vectors_3 = [
+    [125, 0x7D],
+    [-125, 0x83],
+    [126, 0x7E],
+    [-126, 0x82],
+    [127, 0x7F],
+    [-127, 0x81],
+    [-128, 0x80],
+]
+
+test_vectors_4 = [
+    [128, [0x00, 0x80]],
+    [129, [0x00, 0x81]],
+    [-129, [0xFF, 0x7F]],
+    [130, [0x00, 0x82]],
+    [-130, [0xFF, 0x7E]],
+    [253, [0x00, 0xFD]],
+    [256, [0x01, 0x00]],
+    [-256, [0xFF, 0x00]],
+    [-257, [0xFE, 0xFF]],
+    [258, [0x01, 0x02]],
+]
+
+
+def test_encode_signed_number():
+    assert codec.encode_signed_number(-256) == bytes([0xFF, 0x00])
+    assert codec.encode_signed_number(-0x11) == bytes([0xEF])
+    assert codec.encode_signed_number(-128) == bytes([0x80])
+    assert codec.encode_signed_number(-1) == bytes([0xFF])
+    assert codec.encode_signed_number(0) == bytes([])
+    assert codec.encode_signed_number(1) == bytes([0x01])
+    assert codec.encode_signed_number(256) == bytes([0x01, 0x00])
+    assert codec.encode_signed_number(127) == bytes([0x7F])
+    assert codec.encode_signed_number(0x11) == bytes([0x11])
+    assert codec.encode_signed_number(255) == bytes([0x00, 0xFF])
+
+    for [input_data, expected_data] in test_vectors_1:
+        assert codec.encode_signed_number(input_data) == bytes([expected_data])
+
+    for [input_data, expected_data] in test_vectors_2:
+        assert codec.encode_signed_number(input_data) == bytes([expected_data])
+
+    for [input_data, expected_data] in test_vectors_3:
+        assert codec.encode_signed_number(input_data) == bytes([expected_data])
+
+    for [input_data, [expected_data_1, expected_data_2]] in test_vectors_4:
+        assert codec.encode_signed_number(input_data) == bytes([expected_data_1, expected_data_2])