diff --git a/skbase/tests/test_deep_equals.py b/skbase/tests/test_deep_equals.py
new file mode 100644
index 00000000..b361c709
--- /dev/null
+++ b/skbase/tests/test_deep_equals.py
@@ -0,0 +1,13 @@
+def test_deep_equals_numpy_string_array():
+    """Test that deep_equals works on string-dtype numpy arrays. GitHub issue #517."""
+    import numpy as np
+
+    from skbase.utils.deep_equals import deep_equals
+
+    s = np.array(["1", "2", "1"])
+    # Same arrays should be equal
+    assert deep_equals(s, s) is True
+
+    # Different arrays should not be equal
+    t = np.array(["1", "2", "3"])
+    assert deep_equals(s, t) is False
diff --git a/skbase/utils/deep_equals/_deep_equals.py b/skbase/utils/deep_equals/_deep_equals.py
index cf73a5a7..ab72dfb9 100644
--- a/skbase/utils/deep_equals/_deep_equals.py
+++ b/skbase/utils/deep_equals/_deep_equals.py
@@ -142,7 +142,7 @@ def _numpy_equals_plugin(x, y, return_msg=False, deep_equals=None):
         return ret(False, f".shape, x.shape = {x.shape} != y.shape = {y.shape}")
     if x.dtype != y.dtype:
         return ret(False, f".dtype, x.dtype = {x.dtype} != y.dtype = {y.dtype}")
-    if x.dtype == "str":
+    if x.dtype == "str" or np.issubdtype(x.dtype, np.character):
         return ret(np.array_equal(x, y), ".values")
     elif x.dtype == "object":
         x_flat = x.flatten()