The null character is allowed in __name__ setter (but error message is a little confusing).

>>> class A: pass
... 
>>> A.__name__ = 'B\0'
Traceback (most recent call last):
  File "<stdin>", line 1, in <module>
ValueError: __name__ must not contain null bytes

But is allowed in type constructor.

>>> t = type('B\0C', (), {})
>>> t
<class '__main__.BC'>
>>> t.__name__
'B\x00C'

Why are null bytes being excluded from type names in the first place?

Because tp_name is a pointer to null-terminated C string and there is no way to distinguish the name containg the null byte from the name terminated by null byte. tp_name is used for example in error messages.

>>> t = type('B\0C', (), {})
>>> t.__name__
'B\x00C'
>>> t() + 0
Traceback (most recent call last):
  File "<stdin>", line 1, in <module>
TypeError: unsupported operand type(s) for +: 'B' and 'int'

New changeset 29cc6b2f9d28 by Serhiy Storchaka in branch '2.7':
Issue #25961: Disallowed null characters in the type name.
https://hg.python.org/cpython/rev/29cc6b2f9d28

New changeset d2417971c934 by Serhiy Storchaka in branch '3.5':
Issue #25961: Disallowed null characters in the type name.
https://hg.python.org/cpython/rev/d2417971c934

New changeset 1ab7bcd4e176 by Serhiy Storchaka in branch 'default':
Issue #25961: Disallowed null characters in the type name.
https://hg.python.org/cpython/rev/1ab7bcd4e176

Hi all,

I fixed a compile error introduced in Python 2.7 by this issue. There is a jump made to an nonexistent label "error" in type_new function in Objects/typeobject.c. Please see the attached patch.

Regards,
Florin Papa

Thank you Florin. How could I miss this?

But your patch is not correct. It leads to double free and deallocating using non-initialized pointer. It also contains trailing spaces and incorrect indentation.

New changeset 57fea6f75ac2 by Serhiy Storchaka in branch '2.7':
Issue #25961: Fixed compilation error and a leak in type constructor.
https://hg.python.org/cpython/rev/57fea6f75ac2