diff --git a/apps/web/app/(app)/[emailAccountId]/assistant/ActionSummaryCard.tsx b/apps/web/app/(app)/[emailAccountId]/assistant/ActionSummaryCard.tsx
index 2ef8cdb088..71ecabac43 100644
--- a/apps/web/app/(app)/[emailAccountId]/assistant/ActionSummaryCard.tsx
+++ b/apps/web/app/(app)/[emailAccountId]/assistant/ActionSummaryCard.tsx
@@ -8,15 +8,18 @@ import {
 } from "@/app/(app)/[emailAccountId]/assistant/constants";
 import { TooltipExplanation } from "@/components/TooltipExplanation";
 import { getEmailTerminology } from "@/utils/terminology";
+import type { EmailLabel } from "@/providers/EmailProvider";
 
 export function ActionSummaryCard({
   action,
   typeOptions,
   provider,
+  labels,
 }: {
   action: CreateRuleBody["actions"][number];
   typeOptions: { label: string; value: ActionType }[];
   provider: string;
+  labels: EmailLabel[];
 }) {
   // don't display
   if (
@@ -37,13 +40,17 @@ export function ActionSummaryCard({
 
   switch (action.type) {
     case ActionType.LABEL: {
-      const labelValue = action.label?.value || "";
-      if (action.label?.ai) {
-        summaryContent = labelValue
-          ? `AI ${terminology.label.action}: ${labelValue}`
+      const labelId = action.labelId?.value || "";
+      const labelName = labelId
+        ? labels.find((label) => label.id === labelId)?.name
+        : action.labelId?.name || "";
+
+      if (action.labelId?.ai) {
+        summaryContent = labelName
+          ? `AI ${terminology.label.action}: ${labelName}`
           : `AI ${terminology.label.action}`;
       } else {
-        summaryContent = `${terminology.label.action} as "${labelValue || "unset"}"`;
+        summaryContent = `${terminology.label.action} as "${labelName || "unset"}"`;
       }
       break;
     }
diff --git a/apps/web/app/(app)/[emailAccountId]/assistant/CreatedRulesModal.tsx b/apps/web/app/(app)/[emailAccountId]/assistant/CreatedRulesModal.tsx
index d48f8ffa69..1cc7d2857e 100644
--- a/apps/web/app/(app)/[emailAccountId]/assistant/CreatedRulesModal.tsx
+++ b/apps/web/app/(app)/[emailAccountId]/assistant/CreatedRulesModal.tsx
@@ -19,6 +19,7 @@ import { CheckCircle2 } from "lucide-react";
 import { useRouter } from "next/navigation";
 import { prefixPath } from "@/utils/path";
 import type { CreateRuleResult } from "@/utils/rule/types";
+import { useLabels } from "@/hooks/useLabels";
 
 export function CreatedRulesModal({
   open,
@@ -54,6 +55,8 @@ export function CreatedRulesContent({
     router.push(prefixPath(emailAccountId, "/automation?tab=test"));
   };
 
+  const { userLabels } = useLabels();
+
   return (
     <>
       <DialogHeader>
@@ -90,7 +93,11 @@ export function CreatedRulesContent({
 
                 <div className="flex items-center gap-2">
                   <span className="text-sm font-medium">Actions:</span>
-                  <ActionBadges actions={rule.actions} provider={provider} />
+                  <ActionBadges
+                    actions={rule.actions}
+                    provider={provider}
+                    labels={userLabels}
+                  />
                 </div>
               </div>
             </Card>
diff --git a/apps/web/app/(app)/[emailAccountId]/assistant/FixWithChat.tsx b/apps/web/app/(app)/[emailAccountId]/assistant/FixWithChat.tsx
index a6d8f82fcb..e863bd0ffd 100644
--- a/apps/web/app/(app)/[emailAccountId]/assistant/FixWithChat.tsx
+++ b/apps/web/app/(app)/[emailAccountId]/assistant/FixWithChat.tsx
@@ -13,7 +13,6 @@ import {
 } from "@/components/ui/dialog";
 import { LoadingContent } from "@/components/LoadingContent";
 import { useRules } from "@/hooks/useRules";
-import { useAccount } from "@/providers/EmailAccountProvider";
 import { useModal } from "@/hooks/useModal";
 import { NEW_RULE_ID } from "@/app/(app)/[emailAccountId]/assistant/consts";
 import { Label } from "@/components/Input";
@@ -35,7 +34,6 @@ export function FixWithChat({
   result: RunRulesResult | null;
 }) {
   const { data, isLoading, error } = useRules();
-  const { emailAccountId } = useAccount();
   const { isModalOpen, setIsModalOpen } = useModal();
   const [selectedRuleId, setSelectedRuleId] = useState<string | null>(null);
   const [explanation, setExplanation] = useState("");
@@ -107,7 +105,6 @@ export function FixWithChat({
         <LoadingContent loading={isLoading} error={error}>
           {data && !showExplanation ? (
             <RuleMismatch
-              emailAccountId={emailAccountId}
               result={result}
               rules={data}
               onSelectExpectedRuleId={handleRuleSelect}
@@ -211,12 +208,10 @@ ${
 function RuleMismatch({
   result,
   rules,
-  emailAccountId,
   onSelectExpectedRuleId,
 }: {
   result: RunRulesResult | null;
   rules: RulesResponse;
-  emailAccountId: string;
   onSelectExpectedRuleId: (ruleId: string | null) => void;
 }) {
   return (
@@ -224,10 +219,7 @@ function RuleMismatch({
       <Label name="matchedRule" label="Matched:" />
       <div className="mt-1">
         {result ? (
-          <ProcessResultDisplay
-            result={result}
-            emailAccountId={emailAccountId}
-          />
+          <ProcessResultDisplay result={result} />
         ) : (
           <p>No rule matched</p>
         )}
diff --git a/apps/web/app/(app)/[emailAccountId]/assistant/ProcessResultDisplay.tsx b/apps/web/app/(app)/[emailAccountId]/assistant/ProcessResultDisplay.tsx
index 08908b7521..4e814c7e2d 100644
--- a/apps/web/app/(app)/[emailAccountId]/assistant/ProcessResultDisplay.tsx
+++ b/apps/web/app/(app)/[emailAccountId]/assistant/ProcessResultDisplay.tsx
@@ -1,6 +1,5 @@
 "use client";
 
-import Link from "next/link";
 import { capitalCase } from "capital-case";
 import { CheckCircle2Icon, EyeIcon, ExternalLinkIcon } from "lucide-react";
 import type { RunRulesResult } from "@/utils/ai/choose-rule/run-rules";
@@ -8,18 +7,18 @@ import { Alert, AlertDescription, AlertTitle } from "@/components/ui/alert";
 import { HoverCard } from "@/components/HoverCard";
 import { Badge } from "@/components/Badge";
 import { isAIRule } from "@/utils/condition";
-import { prefixPath } from "@/utils/path";
 import { ActionType } from "@prisma/client";
+import { useRuleDialog } from "./RuleDialog";
 
 export function ProcessResultDisplay({
   result,
   prefix,
-  emailAccountId,
 }: {
   result: RunRulesResult;
   prefix?: string;
-  emailAccountId: string;
 }) {
+  const { ruleDialog, RuleDialogComponent } = useRuleDialog();
+
   if (!result) return null;
 
   if (!result.rule) {
@@ -48,6 +47,36 @@ export function ProcessResultDisplay({
     );
   }
 
+  const handleViewRule = (ruleId: string) => {
+    ruleDialog.onOpen({ ruleId });
+  };
+
+  return (
+    <>
+      <HoverCard
+        className="w-auto max-w-5xl"
+        content={
+          <ActionSummaryCard result={result} onViewRule={handleViewRule} />
+        }
+      >
+        <Badge color="green">
+          {prefix ? prefix : ""}
+          {result.rule.name}
+          <EyeIcon className="ml-1.5 size-3.5 opacity-70" />
+        </Badge>
+      </HoverCard>
+      <RuleDialogComponent />
+    </>
+  );
+}
+
+function ActionSummaryCard({
+  result,
+  onViewRule,
+}: {
+  result: RunRulesResult;
+  onViewRule: (ruleId: string) => void;
+}) {
   const MAX_LENGTH = 280;
 
   const aiGeneratedContent = result.actionItems
@@ -91,52 +120,40 @@ export function ProcessResultDisplay({
       </div>
     ));
 
+  if (!result.rule) return null;
+
   return (
-    <HoverCard
-      className="w-auto max-w-5xl"
-      content={
-        <Alert variant="blue" className="max-w-prose bg-background">
-          <CheckCircle2Icon className="h-4 w-4" />
-          <AlertTitle className="flex items-center justify-between">
-            Matched rule "{result.rule.name}"
-            <Link
-              href={prefixPath(
-                emailAccountId,
-                `/assistant?tab=rule&ruleId=${result.rule.id}`,
-              )}
-              target="_blank"
-              className="ml-1.5"
-            >
-              <span className="sr-only">View rule</span>
-              <ExternalLinkIcon className="size-3.5 opacity-70" />
-            </Link>
-          </AlertTitle>
-          <AlertDescription className="mt-2 space-y-4">
-            {isAIRule(result.rule) && (
-              <div className="text-sm">
-                <span className="font-medium">AI Instructions: </span>
-                {result.rule.instructions.substring(0, MAX_LENGTH)}
-                {result.rule.instructions.length >= MAX_LENGTH && "..."}
-              </div>
-            )}
-            {!!aiGeneratedContent?.length && (
-              <div className="space-y-3">{aiGeneratedContent}</div>
-            )}
-            {!!result.reason && (
-              <div className="border-l-2 border-blue-200 pl-3 text-sm">
-                <span className="font-medium">Reason: </span>
-                {result.reason}
-              </div>
-            )}
-          </AlertDescription>
-        </Alert>
-      }
-    >
-      <Badge color="green">
-        {prefix ? prefix : ""}
-        {result.rule.name}
-        <EyeIcon className="ml-1.5 size-3.5 opacity-70" />
-      </Badge>
-    </HoverCard>
+    <Alert variant="blue" className="max-w-prose bg-background">
+      <CheckCircle2Icon className="h-4 w-4" />
+      <AlertTitle className="flex items-center justify-between">
+        Matched rule "{result.rule.name}"
+        <button
+          onClick={() => onViewRule(result.rule!.id)}
+          className="ml-1.5"
+          type="button"
+        >
+          <span className="sr-only">View rule</span>
+          <ExternalLinkIcon className="size-3.5 opacity-70" />
+        </button>
+      </AlertTitle>
+      <AlertDescription className="mt-2 space-y-4">
+        {isAIRule(result.rule) && (
+          <div className="text-sm">
+            <span className="font-medium">AI Instructions: </span>
+            {result.rule.instructions.substring(0, MAX_LENGTH)}
+            {result.rule.instructions.length >= MAX_LENGTH && "..."}
+          </div>
+        )}
+        {!!aiGeneratedContent?.length && (
+          <div className="space-y-3">{aiGeneratedContent}</div>
+        )}
+        {!!result.reason && (
+          <div className="border-l-2 border-blue-200 pl-3 text-sm">
+            <span className="font-medium">Reason: </span>
+            {result.reason}
+          </div>
+        )}
+      </AlertDescription>
+    </Alert>
   );
 }
diff --git a/apps/web/app/(app)/[emailAccountId]/assistant/ProcessRules.tsx b/apps/web/app/(app)/[emailAccountId]/assistant/ProcessRules.tsx
index b57bba24e1..da35f02dee 100644
--- a/apps/web/app/(app)/[emailAccountId]/assistant/ProcessRules.tsx
+++ b/apps/web/app/(app)/[emailAccountId]/assistant/ProcessRules.tsx
@@ -299,7 +299,6 @@ export function ProcessRulesContent({ testMode }: { testMode: boolean }) {
                     result={allResults[message.id]}
                     onRun={(rerun) => onRun(message, rerun)}
                     testMode={testMode}
-                    emailAccountId={emailAccountId}
                     setInput={setInput}
                   />
                 ))}
@@ -336,7 +335,6 @@ function ProcessRulesRow({
   result,
   onRun,
   testMode,
-  emailAccountId,
   setInput,
 }: {
   message: Message;
@@ -345,7 +343,6 @@ function ProcessRulesRow({
   result: RunRulesResult;
   onRun: (rerun?: boolean) => void;
   testMode: boolean;
-  emailAccountId: string;
   setInput: (input: string) => void;
 }) {
   return (
@@ -369,10 +366,7 @@ function ProcessRulesRow({
             {result ? (
               <>
                 <div className="flex max-w-xs flex-col justify-center gap-0.5 whitespace-nowrap">
-                  <ProcessResultDisplay
-                    result={result}
-                    emailAccountId={emailAccountId}
-                  />
+                  <ProcessResultDisplay result={result} />
                 </div>
                 <FixWithChat
                   setInput={setInput}
diff --git a/apps/web/app/(app)/[emailAccountId]/assistant/RuleForm.tsx b/apps/web/app/(app)/[emailAccountId]/assistant/RuleForm.tsx
index 39bcea9d7f..b0b37eb061 100644
--- a/apps/web/app/(app)/[emailAccountId]/assistant/RuleForm.tsx
+++ b/apps/web/app/(app)/[emailAccountId]/assistant/RuleForm.tsx
@@ -11,7 +11,6 @@ import {
   useForm,
 } from "react-hook-form";
 import { zodResolver } from "@hookform/resolvers/zod";
-import { toast } from "sonner";
 import TextareaAutosize from "react-textarea-autosize";
 import { capitalCase } from "capital-case";
 import { usePostHog } from "posthog-js/react";
@@ -48,9 +47,7 @@ import { actionInputs } from "@/utils/action-item";
 import { Toggle } from "@/components/Toggle";
 import { LoadingContent } from "@/components/LoadingContent";
 import { TooltipExplanation } from "@/components/TooltipExplanation";
-import { Combobox } from "@/components/Combobox";
 import { useLabels } from "@/hooks/useLabels";
-import { createLabelAction } from "@/utils/actions/mail";
 import { MultiSelectFilter } from "@/components/MultiSelectFilter";
 import { useCategories } from "@/hooks/useCategories";
 import { hasVariables, TEMPLATE_VARIABLE_PATTERN } from "@/utils/template";
@@ -97,6 +94,7 @@ import { useFolders } from "@/hooks/useFolders";
 import type { OutlookFolder } from "@/utils/outlook/folders";
 import { cn } from "@/utils";
 import { WebhookDocumentationLink } from "@/components/WebhookDocumentation";
+import { LabelCombobox } from "@/components/LabelCombobox";
 
 export function Rule({
   ruleId,
@@ -201,20 +199,6 @@ export function RuleForm({
 
   const onSubmit: SubmitHandler<CreateRuleBody> = useCallback(
     async (data) => {
-      // create labels that don't exist
-      for (const action of data.actions) {
-        if (action.type === ActionType.LABEL) {
-          const hasLabel = userLabels?.some(
-            (label) => label.name === action.label,
-          );
-          if (!hasLabel && action.label?.value && !action.label?.ai) {
-            await createLabelAction(emailAccountId, {
-              name: action.label.value,
-            });
-          }
-        }
-      }
-
       // set content to empty string if it's not set manually
       for (const action of data.actions) {
         if (action.type === ActionType.DRAFT_EMAIL) {
@@ -302,26 +286,14 @@ export function RuleForm({
             onSuccess();
           } else {
             router.replace(
-              prefixPath(
-                emailAccountId,
-                `/assistant?tab=rule&ruleId=${res.data.rule.id}`,
-              ),
+              prefixPath(emailAccountId, `/assistant/rule/${res.data.rule.id}`),
             );
             router.push(prefixPath(emailAccountId, "/assistant?tab=rules"));
           }
         }
       }
     },
-    [
-      userLabels,
-      router,
-      posthog,
-      emailAccountId,
-      isDialog,
-      onSuccess,
-      mutate,
-      rule,
-    ],
+    [router, posthog, emailAccountId, isDialog, onSuccess, mutate, rule],
   );
 
   const conditions = watch("conditions");
@@ -342,7 +314,7 @@ export function RuleForm({
     watch("actions")?.forEach((_, index) => {
       const actionError =
         errors?.actions?.[index]?.url?.root?.message ||
-        errors?.actions?.[index]?.label?.root?.message ||
+        errors?.actions?.[index]?.labelId?.root?.message ||
         errors?.actions?.[index]?.to?.root?.message;
       if (actionError) actionErrors.push(actionError);
     });
@@ -870,6 +842,7 @@ export function RuleForm({
                 action={action}
                 typeOptions={typeOptions}
                 provider={provider}
+                labels={userLabels}
               />
             ),
           )}
@@ -1018,7 +991,7 @@ function ActionCard({
   errors: FieldErrors<CreateRuleBody>;
   userLabels: EmailLabel[];
   isLoading: boolean;
-  mutate: () => void;
+  mutate: () => Promise<unknown>;
   emailAccountId: string;
   remove: (index: number) => void;
   typeOptions: { label: string; value: ActionType }[];
@@ -1052,8 +1025,8 @@ function ActionCard({
   ) => {
     // Check if the field is visible - this is handled before calling the function
 
-    // For label field, only allow variables if AI generated is toggled on
-    if (field.name === "label") {
+    // For labelId field, only allow variables if AI generated is toggled on
+    if (field.name === "labelId") {
       return isFieldAiGenerated;
     }
 
@@ -1082,8 +1055,8 @@ function ActionCard({
 
     if (!isFieldVisible) return false;
 
-    // For label field, only show variables if AI generated is toggled on
-    if (field.name === "label") {
+    // For labelId field, only show variables if AI generated is toggled on
+    if (field.name === "labelId") {
       return !!action[field.name]?.ai;
     }
 
@@ -1145,13 +1118,16 @@ function ActionCard({
                 <div>
                   <Label name={field.name} label={field.label} />
 
-                  {field.name === "label" && !isAiGenerated ? (
+                  {field.name === "labelId" && !isAiGenerated ? (
                     <div className="mt-2">
                       <LabelCombobox
-                        userLabels={userLabels}
+                        userLabels={userLabels || []}
                         isLoading={isLoading}
                         mutate={mutate}
-                        value={value}
+                        value={{
+                          id: value,
+                          name: action.labelId?.name || null,
+                        }}
                         onChangeValue={(newValue: string) => {
                           setValue(
                             `actions.${index}.${field.name}.value`,
@@ -1161,7 +1137,7 @@ function ActionCard({
                         emailAccountId={emailAccountId}
                       />
                     </div>
-                  ) : field.name === "label" && isAiGenerated ? (
+                  ) : field.name === "labelId" && isAiGenerated ? (
                     <div className="mt-2">
                       <Input
                         type="text"
@@ -1264,7 +1240,7 @@ function ActionCard({
                     </div>
                   )}
 
-                  {field.name === "label" && (
+                  {field.name === "labelId" && (
                     <div className="flex items-center space-x-2 mt-4">
                       <Toggle
                         name={`actions.${index}.${field.name}.ai`}
@@ -1418,69 +1394,6 @@ function CardLayoutRight({
   );
 }
 
-function LabelCombobox({
-  value,
-  onChangeValue,
-  userLabels,
-  isLoading,
-  mutate,
-  emailAccountId,
-}: {
-  value: string;
-  onChangeValue: (value: string) => void;
-  userLabels: EmailLabel[];
-  isLoading: boolean;
-  mutate: () => void;
-  emailAccountId: string;
-}) {
-  const [search, setSearch] = useState("");
-
-  return (
-    <Combobox
-      options={userLabels.map((label) => ({
-        value: label.name || "",
-        label: label.name || "",
-      }))}
-      value={value}
-      onChangeValue={onChangeValue}
-      search={search}
-      onSearch={setSearch}
-      placeholder="Select a label"
-      emptyText={
-        <div>
-          <div>No labels</div>
-          {search && (
-            <Button
-              className="mt-2"
-              variant="outline"
-              onClick={() => {
-                toast.promise(
-                  async () => {
-                    const res = await createLabelAction(emailAccountId, {
-                      name: search,
-                    });
-                    mutate();
-                    if (res?.serverError) throw new Error(res.serverError);
-                  },
-                  {
-                    loading: `Creating label "${search}"...`,
-                    success: `Created label "${search}"`,
-                    error: (errorMessage) =>
-                      `Error creating label "${search}": ${errorMessage}`,
-                  },
-                );
-              }}
-            >
-              {`Create "${search}" label`}
-            </Button>
-          )}
-        </div>
-      }
-      loading={isLoading}
-    />
-  );
-}
-
 function ReplyTrackerAction() {
   return (
     <div className="flex h-full items-center justify-center">
diff --git a/apps/web/app/(app)/[emailAccountId]/assistant/Rules.tsx b/apps/web/app/(app)/[emailAccountId]/assistant/Rules.tsx
index 3b4d4d3c11..4cc48dca44 100644
--- a/apps/web/app/(app)/[emailAccountId]/assistant/Rules.tsx
+++ b/apps/web/app/(app)/[emailAccountId]/assistant/Rules.tsx
@@ -57,6 +57,7 @@ import {
   isGoogleProvider,
   isMicrosoftProvider,
 } from "@/utils/email/provider-types";
+import { useLabels } from "@/hooks/useLabels";
 
 const COLD_EMAIL_BLOCKER_RULE_ID = "cold-email-blocker-rule";
 
@@ -71,6 +72,7 @@ export function Rules({
   const { setOpen } = useSidebar();
   const { setInput } = useChat();
   const { data: emailAccountData } = useEmailAccountFull();
+  const { userLabels } = useLabels();
   const ruleDialog = useDialogState<{ ruleId: string; editMode?: boolean }>();
   const coldEmailDialog = useDialogState();
 
@@ -132,6 +134,7 @@ export function Rules({
               id: "cold-email-blocker-label",
               type: ActionType.LABEL,
               label: inboxZeroLabels.cold_email.name,
+              labelId: null,
               createdAt: new Date(),
               updatedAt: new Date(),
               ruleId: COLD_EMAIL_BLOCKER_RULE_ID,
@@ -153,6 +156,7 @@ export function Rules({
                 ? ActionType.MOVE_FOLDER
                 : ActionType.ARCHIVE,
               label: null,
+              labelId: null,
               createdAt: new Date(),
               updatedAt: new Date(),
               ruleId: COLD_EMAIL_BLOCKER_RULE_ID,
@@ -172,6 +176,7 @@ export function Rules({
               id: "cold-email-blocker-digest",
               type: ActionType.DIGEST,
               label: null,
+              labelId: null,
               createdAt: new Date(),
               updatedAt: new Date(),
               ruleId: COLD_EMAIL_BLOCKER_RULE_ID,
@@ -288,6 +293,7 @@ export function Rules({
                         <ActionBadges
                           actions={rule.actions}
                           provider={provider}
+                          labels={userLabels}
                         />
                       </TableCell>
                       <TableCell className="text-center">
@@ -470,16 +476,19 @@ export function Rules({
 export function ActionBadges({
   actions,
   provider,
+  labels,
 }: {
   actions: {
     id: string;
     type: ActionType;
     label?: string | null;
+    labelId?: string | null;
     folderName?: string | null;
     content?: string | null;
     to?: string | null;
   }[];
   provider: string;
+  labels: Array<{ id: string; name: string }>;
 }) {
   return (
     <div className="flex gap-2 flex-wrap">
@@ -496,7 +505,7 @@ export function ActionBadges({
             className="w-fit text-nowrap"
           >
             <Icon className="size-3 mr-1.5" />
-            {getActionDisplay(action, provider)}
+            {getActionDisplay(action, provider, labels)}
           </Badge>
         );
       })}
diff --git a/apps/web/app/(app)/[emailAccountId]/assistant/TestCustomEmailForm.tsx b/apps/web/app/(app)/[emailAccountId]/assistant/TestCustomEmailForm.tsx
index 01a868a196..2b61203abc 100644
--- a/apps/web/app/(app)/[emailAccountId]/assistant/TestCustomEmailForm.tsx
+++ b/apps/web/app/(app)/[emailAccountId]/assistant/TestCustomEmailForm.tsx
@@ -62,10 +62,7 @@ export const TestCustomEmailForm = () => {
       </form>
       {testResult && (
         <div className="mt-4">
-          <ProcessResultDisplay
-            result={testResult}
-            emailAccountId={emailAccountId}
-          />
+          <ProcessResultDisplay result={testResult} />
         </div>
       )}
     </div>
diff --git a/apps/web/app/(app)/[emailAccountId]/assistant/create/examples.tsx b/apps/web/app/(app)/[emailAccountId]/assistant/create/examples.tsx
index 1d159e2dad..b8b0033296 100644
--- a/apps/web/app/(app)/[emailAccountId]/assistant/create/examples.tsx
+++ b/apps/web/app/(app)/[emailAccountId]/assistant/create/examples.tsx
@@ -49,7 +49,7 @@ export const examples: {
       ],
       actions: [
         { type: ActionType.ARCHIVE },
-        { type: ActionType.LABEL, label: { value: "Newsletter" } },
+        { type: ActionType.LABEL, labelId: { name: "Newsletter" } },
       ],
     },
   },
@@ -68,7 +68,7 @@ export const examples: {
 * Customer complaint`,
         },
       ],
-      actions: [{ type: ActionType.LABEL, label: { value: "High Priority" } }],
+      actions: [{ type: ActionType.LABEL, labelId: { name: "High Priority" } }],
     },
   },
   {
diff --git a/apps/web/app/(app)/[emailAccountId]/assistant/group/Groups.tsx b/apps/web/app/(app)/[emailAccountId]/assistant/group/Groups.tsx
deleted file mode 100644
index 8755c5c7b1..0000000000
--- a/apps/web/app/(app)/[emailAccountId]/assistant/group/Groups.tsx
+++ /dev/null
@@ -1,150 +0,0 @@
-"use client";
-
-import useSWR from "swr";
-import Link from "next/link";
-import { LoadingContent } from "@/components/LoadingContent";
-import { AlertBasic } from "@/components/Alert";
-import {
-  Card,
-  CardDescription,
-  CardHeader,
-  CardTitle,
-} from "@/components/ui/card";
-import {
-  Table,
-  TableBody,
-  TableCell,
-  TableHead,
-  TableHeader,
-  TableRow,
-} from "@/components/ui/table";
-import type { GroupsResponse } from "@/app/api/user/group/route";
-import { Button } from "@/components/ui/button";
-import { ConditionType } from "@/utils/config";
-import { useAccount } from "@/providers/EmailAccountProvider";
-import { prefixPath } from "@/utils/path";
-
-export function Groups() {
-  const { data, isLoading, error } = useSWR<GroupsResponse>("/api/user/group");
-  const { emailAccountId } = useAccount();
-
-  return (
-    <Card>
-      <CardHeader className="space-y-0">
-        <div className="flex justify-between">
-          <div className="space-y-1.5">
-            <CardTitle>Groups</CardTitle>
-            <CardDescription className="mr-2 max-w-prose">
-              Groups organize related emails allowing you to apply actions to
-              matching emails. Create custom groups manually or create a preset
-              group using our AI.
-            </CardDescription>
-          </div>
-        </div>
-      </CardHeader>
-      <LoadingContent loading={isLoading} error={error}>
-        {data?.groups.length ? (
-          <GroupTable groups={data.groups} emailAccountId={emailAccountId} />
-        ) : (
-          <div className="mx-2 mb-2">
-            <AlertBasic
-              title="No groups"
-              description="No groups have been created yet."
-            />
-          </div>
-        )}
-      </LoadingContent>
-    </Card>
-  );
-}
-
-function GroupTable({
-  groups,
-  emailAccountId,
-}: {
-  groups: GroupsResponse["groups"];
-  emailAccountId: string;
-}) {
-  return (
-    <Table>
-      <TableHeader>
-        <TableRow>
-          <TableHead>Group</TableHead>
-          <TableHead className="text-center">Learned Patterns</TableHead>
-          <TableHead>Rule</TableHead>
-          <TableHead className="text-right">Actions</TableHead>
-        </TableRow>
-      </TableHeader>
-      <TableBody>
-        {groups.map((group) => {
-          return (
-            <TableRow key={group.id}>
-              <TableCell className="font-medium">
-                <Link
-                  href={prefixPath(
-                    emailAccountId,
-                    `/assistant/group/${group.id}`,
-                  )}
-                  className="font-semibold"
-                >
-                  {group.name}
-                </Link>
-              </TableCell>
-              <TableCell className="text-center">
-                {group._count.items}
-              </TableCell>
-              <TableCell>
-                {group.rule ? (
-                  <Link
-                    href={prefixPath(
-                      emailAccountId,
-                      `/assistant?tab=rule&ruleId=${group.rule.id}`,
-                    )}
-                    className="hover:underline"
-                  >
-                    {group.rule.name || `Rule ${group.rule.id}`}
-                  </Link>
-                ) : (
-                  <Button variant="outline" size="sm" asChild>
-                    <Link
-                      href={prefixPath(
-                        emailAccountId,
-                        `/assistant/rule/create?groupId=${group.id}&type=${ConditionType.GROUP}`,
-                      )}
-                    >
-                      Attach
-                    </Link>
-                  </Button>
-                )}
-              </TableCell>
-              <TableCell>
-                <div className="flex items-center justify-end gap-1">
-                  <Button variant="outline" size="sm" asChild>
-                    <Link
-                      href={prefixPath(
-                        emailAccountId,
-                        `/assistant/group/${group.id}/examples`,
-                      )}
-                    >
-                      Matching Emails
-                    </Link>
-                  </Button>
-                  <Button variant="outline" size="sm" asChild>
-                    <Link
-                      href={prefixPath(
-                        emailAccountId,
-                        `/assistant/group/${group.id}`,
-                      )}
-                    >
-                      View
-                    </Link>
-                  </Button>
-                </div>
-              </TableCell>
-            </TableRow>
-          );
-        })}
-      </TableBody>
-    </Table>
-  );
-}
diff --git a/apps/web/app/(app)/[emailAccountId]/assistant/rule/[ruleId]/examples/page.tsx b/apps/web/app/(app)/[emailAccountId]/assistant/rule/[ruleId]/examples/page.tsx
index ed8df5ec48..c46cc39a7a 100644
--- a/apps/web/app/(app)/[emailAccountId]/assistant/rule/[ruleId]/examples/page.tsx
+++ b/apps/web/app/(app)/[emailAccountId]/assistant/rule/[ruleId]/examples/page.tsx
@@ -44,7 +44,7 @@ export default function RuleExamplesPage(props: {
               <Link
                 href={prefixPath(
                   emailAccountId,
-                  `/assistant?tab=rule&ruleId=${params.ruleId}`,
+                  `/assistant/rule/${params.ruleId}`,
                 )}
               >
                 View Rule
diff --git a/apps/web/app/(app)/[emailAccountId]/assistant/rule/create/page.tsx b/apps/web/app/(app)/[emailAccountId]/assistant/rule/create/page.tsx
index 272ddc47ad..fa36475bf4 100644
--- a/apps/web/app/(app)/[emailAccountId]/assistant/rule/create/page.tsx
+++ b/apps/web/app/(app)/[emailAccountId]/assistant/rule/create/page.tsx
@@ -28,7 +28,7 @@ export default async function CreateRulePage(props: {
               ? [
                   {
                     type: ActionType.LABEL,
-                    label: { value: searchParams.label },
+                    labelId: { name: searchParams.label },
                   },
                 ]
               : [],
diff --git a/apps/web/app/(app)/[emailAccountId]/assistant/settings/DraftReplies.tsx b/apps/web/app/(app)/[emailAccountId]/assistant/settings/DraftReplies.tsx
index bfa2e369f9..86ed96b927 100644
--- a/apps/web/app/(app)/[emailAccountId]/assistant/settings/DraftReplies.tsx
+++ b/apps/web/app/(app)/[emailAccountId]/assistant/settings/DraftReplies.tsx
@@ -81,6 +81,7 @@ export function useDraftReplies() {
                       type: ActionType.DRAFT_EMAIL,
                       ruleId: rule.id,
                       label: null,
+                      labelId: null,
                       subject: null,
                       content: null,
                       to: null,
diff --git a/apps/web/app/(app)/[emailAccountId]/assistant/settings/SettingsTab.tsx b/apps/web/app/(app)/[emailAccountId]/assistant/settings/SettingsTab.tsx
index ca67fa81b2..b4dd1c7a08 100644
--- a/apps/web/app/(app)/[emailAccountId]/assistant/settings/SettingsTab.tsx
+++ b/apps/web/app/(app)/[emailAccountId]/assistant/settings/SettingsTab.tsx
@@ -6,6 +6,7 @@ import { AwaitingReplySetting } from "@/app/(app)/[emailAccountId]/assistant/set
 import { ReferralSignatureSetting } from "@/app/(app)/[emailAccountId]/assistant/settings/ReferralSignatureSetting";
 import { LearnedPatternsSetting } from "@/app/(app)/[emailAccountId]/assistant/settings/LearnedPatternsSetting";
 import { PersonalSignatureSetting } from "@/app/(app)/[emailAccountId]/assistant/settings/PersonalSignatureSetting";
+import { SystemLabelsSetting } from "@/app/(app)/[emailAccountId]/assistant/settings/SystemLabelsSetting";
 
 export function SettingsTab() {
   return (
@@ -17,6 +18,7 @@ export function SettingsTab() {
       <DigestSetting />
       <PersonalSignatureSetting />
       <ReferralSignatureSetting />
+      <SystemLabelsSetting />
       <LearnedPatternsSetting />
     </div>
   );
diff --git a/apps/web/app/(app)/[emailAccountId]/assistant/settings/SystemLabelsSetting.tsx b/apps/web/app/(app)/[emailAccountId]/assistant/settings/SystemLabelsSetting.tsx
new file mode 100644
index 0000000000..bb8af4de5a
--- /dev/null
+++ b/apps/web/app/(app)/[emailAccountId]/assistant/settings/SystemLabelsSetting.tsx
@@ -0,0 +1,231 @@
+"use client";
+
+import { useState, useMemo } from "react";
+import { useForm } from "react-hook-form";
+import { zodResolver } from "@hookform/resolvers/zod";
+import { SettingCard } from "@/components/SettingCard";
+import { Button } from "@/components/ui/button";
+import { toastError, toastSuccess } from "@/components/Toast";
+import { useEmailAccountFull } from "@/hooks/useEmailAccountFull";
+import { LoadingContent } from "@/components/LoadingContent";
+import { updateSystemLabelsAction } from "@/utils/actions/settings";
+import {
+  updateSystemLabelsBody,
+  type UpdateSystemLabelsBody,
+} from "@/utils/actions/settings.validation";
+import { useLabels } from "@/hooks/useLabels";
+import {
+  Dialog,
+  DialogContent,
+  DialogHeader,
+  DialogTitle,
+  DialogTrigger,
+} from "@/components/ui/dialog";
+import { Label } from "@/components/Input";
+import { LabelCombobox } from "@/components/LabelCombobox";
+import { SettingsIcon } from "lucide-react";
+import {
+  NEEDS_REPLY_LABEL_NAME,
+  AWAITING_REPLY_LABEL_NAME,
+} from "@/utils/reply-tracker/consts";
+import { inboxZeroLabels } from "@/utils/label";
+
+export function SystemLabelsSetting() {
+  const [isOpen, setIsOpen] = useState(false);
+
+  return (
+    <SettingCard
+      title="System Labels"
+      description="Configure which labels the AI assistant uses for reply tracking and cold emails."
+      right={
+        <Dialog open={isOpen} onOpenChange={setIsOpen}>
+          <DialogTrigger asChild>
+            <Button variant="outline">
+              <SettingsIcon className="mr-2 h-4 w-4" />
+              Configure System Labels
+            </Button>
+          </DialogTrigger>
+          {isOpen && (
+            <SystemLabelsDialogContent onClose={() => setIsOpen(false)} />
+          )}
+        </Dialog>
+      }
+    />
+  );
+}
+
+function SystemLabelsDialogContent({ onClose }: { onClose: () => void }) {
+  const {
+    data: emailAccountData,
+    isLoading: isLoadingAccount,
+    error: accountError,
+    mutate,
+  } = useEmailAccountFull();
+  const {
+    userLabels,
+    isLoading: isLoadingLabels,
+    mutate: mutateLabels,
+  } = useLabels();
+
+  return (
+    <DialogContent className="max-w-md">
+      <DialogHeader>
+        <DialogTitle>Configure System Labels</DialogTitle>
+      </DialogHeader>
+      <LoadingContent
+        loading={isLoadingAccount || isLoadingLabels}
+        error={accountError}
+      >
+        {emailAccountData && userLabels && (
+          <SystemLabelsForm
+            emailAccountData={emailAccountData}
+            userLabels={userLabels}
+            isLoadingLabels={isLoadingLabels}
+            mutate={mutate}
+            mutateLabels={mutateLabels}
+            onClose={onClose}
+          />
+        )}
+      </LoadingContent>
+    </DialogContent>
+  );
+}
+
+function SystemLabelsForm({
+  emailAccountData,
+  userLabels,
+  isLoadingLabels,
+  mutate,
+  mutateLabels,
+  onClose,
+}: {
+  emailAccountData: NonNullable<ReturnType<typeof useEmailAccountFull>["data"]>;
+  userLabels: NonNullable<ReturnType<typeof useLabels>["userLabels"]>;
+  isLoadingLabels: boolean;
+  mutate: () => Promise<unknown>;
+  mutateLabels: () => Promise<unknown>;
+  onClose: () => void;
+}) {
+  // Find default labels by name if not already set
+  const defaultValues = useMemo(() => {
+    const defaultNeedsReplyLabel = userLabels.find(
+      (l) => l.name === NEEDS_REPLY_LABEL_NAME,
+    );
+    const defaultAwaitingReplyLabel = userLabels.find(
+      (l) => l.name === AWAITING_REPLY_LABEL_NAME,
+    );
+    const defaultColdEmailLabel = userLabels.find(
+      (l) => l.name === inboxZeroLabels.cold_email.name,
+    );
+
+    return {
+      needsReplyLabelId:
+        emailAccountData.needsReplyLabelId ?? defaultNeedsReplyLabel?.id,
+      awaitingReplyLabelId:
+        emailAccountData.awaitingReplyLabelId ?? defaultAwaitingReplyLabel?.id,
+      coldEmailLabelId:
+        emailAccountData.coldEmailLabelId ?? defaultColdEmailLabel?.id,
+    };
+  }, [emailAccountData, userLabels]);
+
+  const {
+    watch,
+    setValue,
+    handleSubmit,
+    formState: { isSubmitting, isDirty },
+  } = useForm<UpdateSystemLabelsBody>({
+    resolver: zodResolver(updateSystemLabelsBody),
+    defaultValues,
+  });
+
+  const onSubmit = async (data: UpdateSystemLabelsBody) => {
+    if (!emailAccountData?.id) return;
+
+    const result = await updateSystemLabelsAction(emailAccountData.id, data);
+
+    if (result?.serverError) {
+      toastError({ description: result.serverError });
+      return;
+    }
+
+    toastSuccess({ description: "System labels updated" });
+    await mutate();
+    onClose();
+  };
+
+  return (
+    <form onSubmit={handleSubmit(onSubmit)} className="space-y-4 mt-4">
+      <div>
+        <Label name="needsReplyLabelId" label="Needs Reply Label" />
+        <div className="mt-1">
+          <LabelCombobox
+            value={{
+              id: watch("needsReplyLabelId") || null,
+              name: NEEDS_REPLY_LABEL_NAME,
+            }}
+            onChangeValue={(value) =>
+              setValue("needsReplyLabelId", value || undefined, {
+                shouldDirty: true,
+              })
+            }
+            userLabels={userLabels ?? []}
+            isLoading={isLoadingLabels}
+            mutate={mutateLabels}
+            emailAccountId={emailAccountData?.id ?? ""}
+          />
+        </div>
+      </div>
+
+      <div>
+        <Label name="awaitingReplyLabelId" label="Awaiting Reply Label" />
+        <div className="mt-1">
+          <LabelCombobox
+            value={{
+              id: watch("awaitingReplyLabelId") || null,
+              name: AWAITING_REPLY_LABEL_NAME,
+            }}
+            onChangeValue={(value) =>
+              setValue("awaitingReplyLabelId", value || undefined, {
+                shouldDirty: true,
+              })
+            }
+            userLabels={userLabels ?? []}
+            isLoading={isLoadingLabels}
+            mutate={mutateLabels}
+            emailAccountId={emailAccountData?.id ?? ""}
+          />
+        </div>
+      </div>
+
+      <div>
+        <Label name="coldEmailLabelId" label="Cold Email Label" />
+        <div className="mt-1">
+          <LabelCombobox
+            value={{
+              id: watch("coldEmailLabelId") || null,
+              name: inboxZeroLabels.cold_email.name,
+            }}
+            onChangeValue={(value) =>
+              setValue("coldEmailLabelId", value || undefined, {
+                shouldDirty: true,
+              })
+            }
+            userLabels={userLabels ?? []}
+            isLoading={isLoadingLabels}
+            mutate={mutateLabels}
+            emailAccountId={emailAccountData?.id ?? ""}
+          />
+        </div>
+      </div>
+
+      <Button
+        type="submit"
+        disabled={!isDirty || isSubmitting}
+        loading={isSubmitting}
+        className="w-full"
+      >
+        Save Changes
+      </Button>
+    </form>
+  );
+}
diff --git a/apps/web/app/(app)/[emailAccountId]/settings/LabelsSection.tsx b/apps/web/app/(app)/[emailAccountId]/settings/LabelsSection.tsx
deleted file mode 100644
index 37dd5ded94..0000000000
--- a/apps/web/app/(app)/[emailAccountId]/settings/LabelsSection.tsx
+++ /dev/null
@@ -1,387 +0,0 @@
-"use client";
-
-import { useCallback, useMemo, useState } from "react";
-import { type SubmitHandler, useForm } from "react-hook-form";
-import useSwr, { useSWRConfig } from "swr";
-import { capitalCase } from "capital-case";
-import sortBy from "lodash/sortBy";
-import { Button } from "@/components/Button";
-import {
-  FormSection,
-  FormSectionLeft,
-  SubmitButtonWrapper,
-} from "@/components/Form";
-import { Input } from "@/components/Input";
-import { LoadingContent } from "@/components/LoadingContent";
-import { Tag } from "@/components/Tag";
-import { toastError, toastSuccess } from "@/components/Toast";
-import { Toggle } from "@/components/Toggle";
-import { SectionDescription, SectionHeader } from "@/components/Typography";
-import {
-  type GmailLabel,
-  type GmailLabels,
-  GmailProvider,
-  useGmail,
-} from "@/providers/GmailProvider";
-import { createLabelAction, updateLabelsAction } from "@/utils/actions/mail";
-import type { Label } from "@prisma/client";
-import type { UserLabelsResponse } from "@/app/api/user/labels/route";
-import { PlusIcon } from "lucide-react";
-import { isErrorMessage } from "@/utils/error";
-import {
-  Dialog,
-  DialogContent,
-  DialogHeader,
-  DialogTitle,
-  DialogTrigger,
-} from "@/components/ui/dialog";
-import { useAccount } from "@/providers/EmailAccountProvider";
-
-const recommendedLabels = ["Newsletter", "Receipt", "Calendar"];
-
-type ToggleKey = `toggle-${string}`;
-type DescriptionKey = `description-${string}`;
-
-type Inputs = Record<ToggleKey, boolean | undefined | null> &
-  Record<DescriptionKey, string | undefined | null>;
-
-export const LabelsSection = () => {
-  const { data, isLoading, error } =
-    useSwr<UserLabelsResponse>("/api/user/labels");
-
-  return (
-    <GmailProvider>
-      <LoadingContent loading={isLoading} error={error}>
-        {data && <LabelsSectionForm dbLabels={data} />}
-      </LoadingContent>
-    </GmailProvider>
-  );
-};
-
-function LabelsSectionForm(props: { dbLabels: Label[] }) {
-  const { userLabels, labelsIsLoading } = useGmail();
-
-  return (
-    <LoadingContent loading={labelsIsLoading}>
-      {userLabels && (
-        <LabelsSectionFormInner
-          gmailLabels={userLabels}
-          dbLabels={props.dbLabels}
-        />
-      )}
-    </LoadingContent>
-  );
-}
-
-function LabelsSectionFormInner(props: {
-  gmailLabels: GmailLabels;
-  dbLabels: Label[];
-}) {
-  const { gmailLabels, dbLabels } = props;
-
-  const userLabels = useMemo(() => {
-    return sortBy(
-      Object.values(gmailLabels || {})
-        .filter((l) => l.type !== "system")
-        .map((l) => {
-          const dbLabel = dbLabels.find((el) => el.gmailLabelId === l.id);
-
-          return {
-            ...dbLabel,
-            ...l,
-          };
-        }),
-      (l) => (l.enabled ? 0 : 1),
-    );
-  }, [gmailLabels, dbLabels]);
-
-  const defaultValues = Object.fromEntries(
-    userLabels.flatMap((l) => {
-      return [
-        [`toggle-${l.id}`, l.enabled],
-        [`description-${l.id}`, l.description],
-      ];
-    }),
-  );
-
-  const {
-    register,
-    watch,
-    setValue,
-    getValues,
-    formState: { errors, isSubmitting },
-  } = useForm<Inputs>({
-    defaultValues,
-  });
-
-  const recommendedLabelsToCreate = recommendedLabels.filter(
-    (label) =>
-      !Object.values(gmailLabels || {})
-        .map((l) => l.name.toLowerCase())
-        .find((l) => l.indexOf(label.toLowerCase()) > -1),
-  );
-
-  const { emailAccountId } = useAccount();
-
-  return (
-    <FormSection>
-      <FormSectionLeft
-        title="Labels"
-        description="The labels in your inbox help you organize your emails."
-      />
-
-      <div className="flex items-start md:col-span-2">
-        <div className="w-full">
-          <SectionHeader>Your Labels</SectionHeader>
-          <SectionDescription>
-            Labels help our AI properly categorize your emails. You can add a
-            description to help the AI decide how to make use of each one. We
-            will only make use of enabled labels. Visit Gmail to delete labels.
-          </SectionDescription>
-          <div className="mt-2">
-            <AddLabelModal />
-
-            <form
-              className="mt-4"
-              action={async (formData: FormData) => {
-                const formLabels = userLabels.map((l) => {
-                  const toggle = getValues(`toggle-${l.id}`);
-                  const description = formData.get(
-                    `description-${l.id}`,
-                  ) as string;
-
-                  return {
-                    ...l,
-                    enabled: !!toggle,
-                    description,
-                    gmailLabelId: l.id,
-                  };
-                });
-
-                try {
-                  await updateLabelsAction(emailAccountId, {
-                    labels: formLabels,
-                  });
-                  toastSuccess({ description: "Updated labels!" });
-                } catch (error) {
-                  console.error(error);
-                  toastError({
-                    description: "There was an error updating your labels.",
-                  });
-                }
-              }}
-            >
-              <div className="space-y-2">
-                {userLabels.map((label) => (
-                  <LabelItem
-                    key={label.id}
-                    label={label}
-                    register={register}
-                    watch={watch}
-                    setValue={setValue}
-                    errors={errors}
-                  />
-                ))}
-              </div>
-
-              <SubmitButtonWrapper>
-                <Button type="submit" size="lg" loading={isSubmitting}>
-                  Save
-                </Button>
-              </SubmitButtonWrapper>
-            </form>
-          </div>
-
-          {/* <>
-            <SectionHeader>Your Gmail Labels</SectionHeader>
-            <SectionDescription>
-              These are all your existing labels.
-            </SectionDescription>
-
-            <div className="mt-2">
-              <div className="grid grid-cols-2 gap-2 md:grid-cols-3">
-                {Object.values(labels || {}).map((label) => (
-                  <Tag key={label.name} customColors={label.color}>
-                    {label?.type === "system"
-                      ? capitalCase(label.name)
-                      : label.name}
-                  </Tag>
-                ))}
-              </div>
-            </div>
-          </> */}
-
-          {!!recommendedLabelsToCreate.length && (
-            <div className="mt-8">
-              <SectionHeader>Suggested Labels</SectionHeader>
-              <SectionDescription>
-                Labels we suggest adding to organize your emails. Click a label
-                to add it.
-              </SectionDescription>
-              <div className="mt-2">
-                <div className="grid grid-cols-2 gap-2 md:grid-cols-3">
-                  {recommendedLabelsToCreate.map((label) => (
-                    <button
-                      key={label}
-                      type="button"
-                      className="group"
-                      onClick={async () => {
-                        const res = await createLabelAction(emailAccountId, {
-                          name: label,
-                        });
-                        if (isErrorMessage(res)) {
-                          toastError({
-                            title: `Failed to create label "${label}"`,
-                            description: res.error,
-                          });
-                        } else {
-                          toastSuccess({
-                            description: `Label "${label}" created!`,
-                          });
-                        }
-                      }}
-                    >
-                      <Tag>
-                        <div className="relative flex w-full items-center justify-center">
-                          {label}
-                          <span className="absolute right-0 hidden group-hover:block">
-                            <PlusIcon className="h-4 w-4 text-muted-foreground" />
-                          </span>
-                        </div>
-                      </Tag>
-                    </button>
-                  ))}
-                </div>
-              </div>
-            </div>
-          )}
-        </div>
-      </div>
-    </FormSection>
-  );
-}
-
-export function LabelItem(props: {
-  label: GmailLabel;
-  register: any;
-  watch: any;
-  setValue: any;
-  errors: any;
-}) {
-  const { label, register, watch, setValue, errors } = props;
-
-  return (
-    <div className="grid grid-cols-4 items-center gap-x-4 gap-y-6">
-      <div className="">
-        <Tag variant="white" customColors={label.color}>
-          {label?.type === "system" ? capitalCase(label.name) : label.name}
-        </Tag>
-      </div>
-
-      <div className="col-span-3 flex items-center space-x-2">
-        <Toggle
-          name={`toggle-${label.id}`}
-          enabled={!!watch(`toggle-${label.id}`)}
-          onChange={(value) => setValue(`toggle-${label.id}`, value)}
-          error={errors[`toggle-${label.id}`]}
-        />
-
-        <div className="flex-1">
-          <Input
-            type="text"
-            autosizeTextarea
-            rows={2}
-            name={`description-${label.id}`}
-            label=""
-            registerProps={register(`description-${label.id}`)}
-            error={errors[`description-${label.id}`]}
-          />
-        </div>
-      </div>
-    </div>
-  );
-}
-
-function AddLabelModal() {
-  const [isOpen, setIsOpen] = useState(false);
-
-  const { emailAccountId } = useAccount();
-
-  const { mutate } = useSWRConfig();
-
-  const {
-    register,
-    handleSubmit,
-    formState: { errors, isSubmitting },
-  } = useForm<{ name: string; description: string }>();
-
-  const onSubmit: SubmitHandler<{ name: string; description: string }> =
-    useCallback(
-      async (data) => {
-        const { name, description } = data;
-        try {
-          await createLabelAction(emailAccountId, { name, description });
-
-          toastSuccess({
-            description: `Label "${name}" created!`,
-          });
-
-          // TODO this doesn't work properly. still needs a page refresh
-          // the problem is further up in this file where we're using useGmail
-          // refetch labels
-          mutate("/api/labels");
-          mutate("/api/user/labels");
-
-          setIsOpen(false);
-        } catch (error) {
-          console.error(`Failed to create label "${name}": ${error}`);
-          toastError({
-            description: `Failed to create label "${name}"`,
-          });
-        }
-      },
-      [mutate, emailAccountId],
-    );
-
-  return (
-    <Dialog open={isOpen} onOpenChange={setIsOpen}>
-      <DialogTrigger asChild>
-        <Button>Add Label</Button>
-      </DialogTrigger>
-      <DialogContent>
-        <DialogHeader>
-          <DialogTitle>Add Label</DialogTitle>
-        </DialogHeader>
-        <form onSubmit={handleSubmit(onSubmit)}>
-          <div className="space-y-4">
-            <Input
-              type="text"
-              name="name"
-              label="Name"
-              placeholder="e.g. Newsletter"
-              registerProps={register("name")}
-              error={errors.name}
-            />
-
-            <Input
-              type="text"
-              autosizeTextarea
-              rows={2}
-              name="description"
-              label="Description"
-              placeholder="e.g. Emails from newsletters"
-              registerProps={register("description")}
-              error={errors.description}
-            />
-
-            <SubmitButtonWrapper>
-              <Button type="submit" size="lg" loading={isSubmitting}>
-                Create
-              </Button>
-            </SubmitButtonWrapper>
-          </div>
-        </form>
-      </DialogContent>
-    </Dialog>
-  );
-}
diff --git a/apps/web/app/(landing)/components/page.tsx b/apps/web/app/(landing)/components/page.tsx
index 452bd24835..9b78b32cf0 100644
--- a/apps/web/app/(landing)/components/page.tsx
+++ b/apps/web/app/(landing)/components/page.tsx
@@ -332,6 +332,7 @@ export default function Components() {
                 },
               ]}
               provider="gmail"
+              labels={[{ id: "label", name: "Label" }]}
             />
           </div>
         </div>
diff --git a/apps/web/app/api/user/rules/[id]/route.ts b/apps/web/app/api/user/rules/[id]/route.ts
index 91e67769dd..3952dcd2b9 100644
--- a/apps/web/app/api/user/rules/[id]/route.ts
+++ b/apps/web/app/api/user/rules/[id]/route.ts
@@ -28,8 +28,9 @@ async function getRule({
     ...rule,
     actions: rule.actions.map((action) => ({
       ...action,
-      label: {
-        value: action.label,
+      labelId: {
+        value: action.labelId, // Use labelId as value, fall back to name for old rules
+        name: action.label, // Fallback
         ai: hasVariables(action.label),
       },
       subject: { value: action.subject },
diff --git a/apps/web/components/GroupedTable.tsx b/apps/web/components/GroupedTable.tsx
index ecddc49725..169ffd8811 100644
--- a/apps/web/components/GroupedTable.tsx
+++ b/apps/web/components/GroupedTable.tsx
@@ -434,7 +434,7 @@ function GroupRow({
                 <Link
                   href={prefixPath(
                     emailAccountId,
-                    `/assistant?tab=rule&ruleId=${rule.id}`,
+                    `/assistant/rule/${rule.id}`,
                   )}
                   target="_blank"
                 >
diff --git a/apps/web/components/LabelCombobox.tsx b/apps/web/components/LabelCombobox.tsx
new file mode 100644
index 0000000000..0d013706ec
--- /dev/null
+++ b/apps/web/components/LabelCombobox.tsx
@@ -0,0 +1,90 @@
+"use client";
+
+import { useState } from "react";
+import { toast } from "sonner";
+import { Button } from "@/components/ui/button";
+import { Combobox } from "@/components/Combobox";
+import { createLabelAction } from "@/utils/actions/mail";
+import type { EmailLabel } from "@/providers/EmailProvider";
+
+export function LabelCombobox({
+  value,
+  onChangeValue,
+  userLabels,
+  isLoading,
+  mutate,
+  emailAccountId,
+}: {
+  value: {
+    id: string | null;
+    name: string | null;
+  };
+  onChangeValue: (value: string) => void;
+  userLabels: EmailLabel[];
+  isLoading: boolean;
+  mutate: () => Promise<unknown>;
+  emailAccountId: string;
+}) {
+  const [search, setSearch] = useState("");
+
+  const selectedLabel = userLabels.find(
+    (label) => label.id === value.id || label.name === value.name,
+  );
+
+  return (
+    <Combobox
+      options={userLabels.map((label) => ({
+        value: label.id || "",
+        label: label.name || "",
+      }))}
+      value={value.id || ""}
+      onChangeValue={onChangeValue}
+      search={search}
+      onSearch={setSearch}
+      placeholder={selectedLabel?.name || "Select a label"}
+      emptyText={
+        <div>
+          <div>No labels</div>
+          {search && (
+            <Button
+              className="mt-2"
+              variant="outline"
+              onClick={() => {
+                const searchValue = search;
+
+                toast.promise(
+                  async () => {
+                    const res = await createLabelAction(emailAccountId, {
+                      name: searchValue,
+                    });
+                    if (res?.serverError) throw new Error(res.serverError);
+
+                    await mutate();
+
+                    setSearch("");
+
+                    // Auto-select the newly created label
+                    if (res?.data?.id) {
+                      onChangeValue(res.data.id);
+                    }
+
+                    return res;
+                  },
+                  {
+                    loading: `Creating label "${searchValue}"...`,
+                    success: `Created label "${searchValue}"`,
+                    error: (errorMessage) =>
+                      `Error creating label "${searchValue}": ${errorMessage}`,
+                  },
+                );
+              }}
+            >
+              {`Create "${search}" label`}
+            </Button>
+          )}
+        </div>
+      }
+      loading={isLoading}
+    />
+  );
+}
diff --git a/apps/web/prisma/migrations/20251005093547_label_id/migration.sql b/apps/web/prisma/migrations/20251005093547_label_id/migration.sql
new file mode 100644
index 0000000000..2b1538f734
--- /dev/null
+++ b/apps/web/prisma/migrations/20251005093547_label_id/migration.sql
@@ -0,0 +1,13 @@
+-- AlterTable
+ALTER TABLE "Action" ADD COLUMN     "labelId" TEXT;
+
+-- AlterTable
+ALTER TABLE "EmailAccount" ADD COLUMN     "awaitingReplyLabelId" TEXT,
+ADD COLUMN     "coldEmailLabelId" TEXT,
+ADD COLUMN     "needsReplyLabelId" TEXT;
+
+-- AlterTable
+ALTER TABLE "ExecutedAction" ADD COLUMN     "labelId" TEXT;
+
+-- AlterTable
+ALTER TABLE "ScheduledAction" ADD COLUMN     "labelId" TEXT;
diff --git a/apps/web/prisma/schema.prisma b/apps/web/prisma/schema.prisma
index fb485bb347..038a10adb3 100644
--- a/apps/web/prisma/schema.prisma
+++ b/apps/web/prisma/schema.prisma
@@ -129,6 +129,11 @@ model EmailAccount {
   outboundReplyTracking Boolean           @default(false) // When true: manages "To Reply" and "Awaiting Reply" labels automatically
   autoCategorizeSenders Boolean           @default(false)
 
+  // Configurable system labels (store stable IDs)
+  needsReplyLabelId     String? // Gmail: Label ID, Outlook: Category ID
+  awaitingReplyLabelId  String? // Gmail: Label ID, Outlook: Category ID
+  coldEmailLabelId      String? // Gmail: Label ID, Outlook: Category ID
+
   digestSchedule Schedule?
 
   userId    String
@@ -423,7 +428,8 @@ model Action {
   ruleId    String
   rule      Rule       @relation(fields: [ruleId], references: [id], onDelete: Cascade)
 
-  label          String?
+  label          String? // labelName - labelId is the source of truth, and we use it when set
+  labelId        String? // Stable ID: Label ID (Gmail) or Category ID (Outlook)
   subject        String?
   content        String?
   to             String?
@@ -501,6 +507,7 @@ model ExecutedAction {
 
   // optional extra fields to be used with the action
   label      String?
+  labelId    String? // Stable ID: Label ID (Gmail) or Category ID (Outlook)
   subject    String?
   content    String?
   to         String?
@@ -532,6 +539,7 @@ model ScheduledAction {
   schedulingStatus SchedulingStatus      @default(PENDING)
 
   label       String?
+  labelId     String? // Stable ID: Label ID (Gmail) or Category ID (Outlook)
   subject     String?
   content     String?
   to          String?
diff --git a/apps/web/utils/__mocks__/email-provider.ts b/apps/web/utils/__mocks__/email-provider.ts
index ca9ba4446c..98d0620b1a 100644
--- a/apps/web/utils/__mocks__/email-provider.ts
+++ b/apps/web/utils/__mocks__/email-provider.ts
@@ -44,6 +44,8 @@ export const createMockEmailProvider = (
   }),
   getLabels: vi.fn().mockResolvedValue([]),
   getLabelById: vi.fn().mockResolvedValue(null),
+  getLabelByName: vi.fn().mockResolvedValue(null),
+  getSignatures: vi.fn().mockResolvedValue([]),
   getMessage: vi.fn().mockResolvedValue({
     id: "msg1",
     threadId: "thread1",
@@ -74,11 +76,6 @@ export const createMockEmailProvider = (
   trashThread: vi.fn().mockResolvedValue(undefined),
   labelMessage: vi.fn().mockResolvedValue(undefined),
   removeThreadLabel: vi.fn().mockResolvedValue(undefined),
-  getNeedsReplyLabel: vi.fn().mockResolvedValue(null),
-  getAwaitingReplyLabel: vi.fn().mockResolvedValue(null),
-  labelAwaitingReply: vi.fn().mockResolvedValue(undefined),
-  removeAwaitingReplyLabel: vi.fn().mockResolvedValue(undefined),
-  removeNeedsReplyLabel: vi.fn().mockResolvedValue(undefined),
   draftEmail: vi.fn().mockResolvedValue({ draftId: "draft1" }),
   replyToEmail: vi.fn().mockResolvedValue(undefined),
   sendEmail: vi.fn().mockResolvedValue(undefined),
diff --git a/apps/web/utils/action-display.tsx b/apps/web/utils/action-display.tsx
index b8d070c5fd..b59a12e886 100644
--- a/apps/web/utils/action-display.tsx
+++ b/apps/web/utils/action-display.tsx
@@ -20,11 +20,13 @@ export function getActionDisplay(
   action: {
     type: ActionType;
     label?: string | null;
+    labelId?: string | null;
     folderName?: string | null;
     content?: string | null;
     to?: string | null;
   },
   provider: string,
+  labels: Array<{ id: string; name: string }>,
 ): string {
   const terminology = getEmailTerminology(provider);
   switch (action.type) {
@@ -33,10 +35,26 @@ export function getActionDisplay(
         return `Draft Reply: ${truncate(action.content, 10)}`;
       }
       return "Draft Reply";
-    case ActionType.LABEL:
-      return action.label
-        ? `${terminology.label.action} as '${truncate(action.label, 15)}'`
+    case ActionType.LABEL: {
+      let labelName: string | null | undefined = null;
+
+      // Priority 1: Use labelId to look up current name from labels
+      if (action.labelId && labels) {
+        const foundLabel = labels.find((l) => l.id === action.labelId);
+        if (foundLabel) {
+          labelName = foundLabel.name;
+        }
+      }
+
+      // Priority 2: Fallback to stored label name (may be outdated but better than nothing)
+      if (!labelName && action.label) {
+        labelName = action.label;
+      }
+
+      return labelName
+        ? `${terminology.label.action} as '${truncate(labelName, 15)}'`
         : terminology.label.action;
+    }
     case ActionType.ARCHIVE:
       return "Skip Inbox";
     case ActionType.MARK_READ:
diff --git a/apps/web/utils/action-item.ts b/apps/web/utils/action-item.ts
index ab64370411..b8d8f03322 100644
--- a/apps/web/utils/action-item.ts
+++ b/apps/web/utils/action-item.ts
@@ -10,7 +10,7 @@ export const actionInputs: Record<
   {
     fields: {
       name:
-        | "label"
+        | "labelId"
         | "subject"
         | "content"
         | "to"
@@ -30,7 +30,7 @@ export const actionInputs: Record<
   [ActionType.LABEL]: {
     fields: [
       {
-        name: "label",
+        name: "labelId",
         label: "Label",
       },
     ],
@@ -187,6 +187,7 @@ type ActionFieldsSelection = Pick<
   Prisma.ActionCreateInput,
   | "type"
   | "label"
+  | "labelId"
   | "subject"
   | "content"
   | "to"
@@ -204,6 +205,7 @@ export function sanitizeActionFields(
   const base: ActionFieldsSelection = {
     type: action.type,
     label: null,
+    labelId: null,
     subject: null,
     content: null,
     to: null,
@@ -233,6 +235,7 @@ export function sanitizeActionFields(
       return {
         ...base,
         label: action.label ?? null,
+        labelId: action.labelId ?? null,
       };
     }
     case ActionType.REPLY: {
diff --git a/apps/web/utils/actions/rule.ts b/apps/web/utils/actions/rule.ts
index 08f3d430e3..0578d0c70c 100644
--- a/apps/web/utils/actions/rule.ts
+++ b/apps/web/utils/actions/rule.ts
@@ -40,6 +40,7 @@ import { prefixPath } from "@/utils/path";
 import { createRuleHistory } from "@/utils/rule/rule-history";
 import { ONE_WEEK_MINUTES } from "@/utils/date";
 import { createEmailProvider } from "@/utils/email/provider";
+import { resolveLabelNameAndId } from "@/utils/label/resolve-label";
 
 function getCategoryActionDescription(categoryAction: CategoryAction): string {
   switch (categoryAction) {
@@ -64,8 +65,19 @@ async function getActionsFromCategoryAction(
   hasDigest: boolean,
   provider: string,
 ): Promise<Prisma.ActionCreateManyRuleInput[]> {
+  const emailProvider = await createEmailProvider({
+    emailAccountId,
+    provider,
+  });
+
+  const { label: labelName, labelId } = await resolveLabelNameAndId({
+    emailProvider,
+    label,
+    labelId: null,
+  });
+
   let actions: Prisma.ActionCreateManyRuleInput[] = [
-    { type: ActionType.LABEL, label },
+    { type: ActionType.LABEL, label: labelName, labelId },
   ];
 
   switch (categoryAction) {
@@ -116,7 +128,7 @@ export const createRuleAction = actionClient
   .schema(createRuleBody)
   .action(
     async ({
-      ctx: { emailAccountId, logger },
+      ctx: { emailAccountId, logger, provider },
       parsedInput: {
         name,
         runOnThreads,
@@ -128,18 +140,24 @@ export const createRuleAction = actionClient
     }) => {
       const conditions = flattenConditions(conditionsInput);
 
+      const resolvedActions = await resolveActionLabels(
+        actions || [],
+        emailAccountId,
+        provider,
+      );
+
       try {
         const rule = await prisma.rule.create({
           data: {
             name,
             runOnThreads: runOnThreads ?? undefined,
-            actions: actions
+            actions: resolvedActions.length
               ? {
                   createMany: {
-                    data: actions.map(
+                    data: resolvedActions.map(
                       ({
                         type,
-                        label,
+                        labelId,
                         subject,
                         content,
                         to,
@@ -151,7 +169,8 @@ export const createRuleAction = actionClient
                       }) => {
                         return sanitizeActionFields({
                           type,
-                          label: label?.value,
+                          label: labelId?.name,
+                          labelId: labelId?.value,
                           subject: subject?.value,
                           content: content?.value,
                           to: to?.value,
@@ -213,7 +232,7 @@ export const updateRuleAction = actionClient
   .schema(updateRuleBody)
   .action(
     async ({
-      ctx: { emailAccountId, logger },
+      ctx: { emailAccountId, logger, provider },
       parsedInput: {
         id,
         name,
@@ -226,6 +245,12 @@ export const updateRuleAction = actionClient
     }) => {
       const conditions = flattenConditions(conditionsInput);
 
+      const resolvedActions = await resolveActionLabels(
+        actions,
+        emailAccountId,
+        provider,
+      );
+
       try {
         const currentRule = await prisma.rule.findUnique({
           where: { id, emailAccountId },
@@ -236,10 +261,11 @@ export const updateRuleAction = actionClient
         const currentActions = currentRule.actions;
 
         const actionsToDelete = currentActions.filter(
-          (currentAction) => !actions.find((a) => a.id === currentAction.id),
+          (currentAction) =>
+            !resolvedActions.find((a) => a.id === currentAction.id),
         );
-        const actionsToUpdate = actions.filter((a) => a.id);
-        const actionsToCreate = actions.filter((a) => !a.id);
+        const actionsToUpdate = resolvedActions.filter((a) => a.id);
+        const actionsToCreate = resolvedActions.filter((a) => !a.id);
 
         const [updatedRule] = await prisma.$transaction([
           // update rule
@@ -280,7 +306,8 @@ export const updateRuleAction = actionClient
               where: { id: a.id },
               data: sanitizeActionFields({
                 type: a.type,
-                label: a.label?.value,
+                label: a.labelId?.name,
+                labelId: a.labelId?.value,
                 subject: a.subject?.value,
                 content: a.content?.value,
                 to: a.to?.value,
@@ -300,7 +327,8 @@ export const updateRuleAction = actionClient
                     return {
                       ...sanitizeActionFields({
                         type: a.type,
-                        label: a.label?.value,
+                        label: a.labelId?.name,
+                        labelId: a.labelId?.value,
                         subject: a.subject?.value,
                         content: a.content?.value,
                         to: a.to?.value,
@@ -779,3 +807,41 @@ export async function getRuleNameByExecutedAction(
 
   return executedAction.executedRule?.rule?.name;
 }
+
+async function resolveActionLabels<
+  T extends {
+    type: ActionType;
+    labelId?: {
+      name?: string | null;
+      value?: string | null;
+      ai?: boolean | null;
+    } | null;
+  },
+>(actions: T[], emailAccountId: string, provider: string) {
+  const emailProvider = await createEmailProvider({
+    emailAccountId,
+    provider,
+  });
+
+  return Promise.all(
+    actions.map(async (action) => {
+      if (action.type === ActionType.LABEL) {
+        const { label: resolvedLabel, labelId: resolvedLabelId } =
+          await resolveLabelNameAndId({
+            emailProvider,
+            label: action.labelId?.name || null,
+            labelId: action.labelId?.value || null,
+          });
+        return {
+          ...action,
+          labelId: {
+            value: resolvedLabelId,
+            name: resolvedLabel,
+            ai: action.labelId?.ai,
+          },
+        };
+      }
+      return action;
+    }),
+  );
+}
diff --git a/apps/web/utils/actions/rule.validation.ts b/apps/web/utils/actions/rule.validation.ts
index c332d57cc7..eeaed500c6 100644
--- a/apps/web/utils/actions/rule.validation.ts
+++ b/apps/web/utils/actions/rule.validation.ts
@@ -68,6 +68,8 @@ const zodField = z
     ai: z.boolean().nullish(),
     // only needed for frontend
     setManually: z.boolean().nullish(),
+    // label name for backup if no labelId exists (only for label field)
+    name: z.string().nullish(),
   })
   .nullish();
 
@@ -75,7 +77,7 @@ const zodAction = z
   .object({
     id: z.string().optional(),
     type: zodActionType,
-    label: zodField,
+    labelId: zodField,
     subject: zodField,
     content: zodField,
     to: zodField,
@@ -87,11 +89,11 @@ const zodAction = z
     delayInMinutes: delayInMinutesSchema,
   })
   .superRefine((data, ctx) => {
-    if (data.type === ActionType.LABEL && !data.label?.value?.trim()) {
+    if (data.type === ActionType.LABEL && !data.labelId?.value?.trim()) {
       ctx.addIssue({
         code: z.ZodIssueCode.custom,
         message: "Please enter a label name for the Label action",
-        path: ["label"],
+        path: ["labelId"],
       });
     }
     if (data.type === ActionType.FORWARD && !data.to?.value?.trim()) {
diff --git a/apps/web/utils/actions/settings.ts b/apps/web/utils/actions/settings.ts
index 537ffe6916..cf50c20179 100644
--- a/apps/web/utils/actions/settings.ts
+++ b/apps/web/utils/actions/settings.ts
@@ -8,6 +8,7 @@ import {
   saveEmailUpdateSettingsBody,
   saveDigestScheduleBody,
   updateDigestItemsBody,
+  updateSystemLabelsBody,
 } from "@/utils/actions/settings.validation";
 import { DEFAULT_PROVIDER } from "@/utils/llms/config";
 import prisma from "@/utils/prisma";
@@ -86,20 +87,28 @@ export const updateReplyTrackingAction = actionClient
   .metadata({ name: "updateReplyTracking" })
   .schema(z.object({ enabled: z.boolean() }))
   .action(async ({ ctx: { emailAccountId }, parsedInput: { enabled } }) => {
-    // Find all rules with "To Reply" label first
+    const emailAccount = await prisma.emailAccount.findUnique({
+      where: { id: emailAccountId },
+      select: { needsReplyLabelId: true },
+    });
+
+    // Find all rules with "To Reply" label (by labelId or legacy label name)
     const toReplyRules = await prisma.rule.findMany({
       where: {
         emailAccountId,
         actions: {
           some: {
             type: ActionType.LABEL,
-            label: NEEDS_REPLY_LABEL_NAME,
+            OR: [
+              ...(emailAccount?.needsReplyLabelId
+                ? [{ labelId: emailAccount.needsReplyLabelId }]
+                : []),
+              { label: NEEDS_REPLY_LABEL_NAME },
+            ],
           },
         },
       },
-      include: {
-        actions: true,
-      },
+      include: { actions: true },
     });
 
     // Prepare the operations
@@ -209,3 +218,58 @@ export const updateDigestItemsAction = actionClient
       return { success: true };
     },
   );
+
+export const updateSystemLabelsAction = actionClient
+  .metadata({ name: "updateSystemLabels" })
+  .schema(updateSystemLabelsBody)
+  .action(
+    async ({
+      ctx: { emailAccountId },
+      parsedInput: {
+        needsReplyLabelId,
+        awaitingReplyLabelId,
+        coldEmailLabelId,
+      },
+    }) => {
+      // Get the old label IDs before updating
+      const oldConfig = await prisma.emailAccount.findUnique({
+        where: { id: emailAccountId },
+        select: {
+          needsReplyLabelId: true,
+          awaitingReplyLabelId: true,
+          coldEmailLabelId: true,
+        },
+      });
+
+      await prisma.emailAccount.update({
+        where: { id: emailAccountId },
+        data: {
+          needsReplyLabelId: needsReplyLabelId ?? null,
+          awaitingReplyLabelId: awaitingReplyLabelId ?? null,
+          coldEmailLabelId: coldEmailLabelId ?? null,
+        },
+      });
+
+      // Update all LABEL actions that match the old needs reply label
+      if (needsReplyLabelId) {
+        await prisma.action.updateMany({
+          where: {
+            rule: { emailAccountId },
+            type: ActionType.LABEL,
+            OR: [
+              ...(oldConfig?.needsReplyLabelId
+                ? [{ labelId: oldConfig.needsReplyLabelId }]
+                : []),
+              { label: NEEDS_REPLY_LABEL_NAME },
+            ],
+          },
+          data: {
+            labelId: needsReplyLabelId,
+            label: null, // Clear the label name since we're using labelId now
+          },
+        });
+      }
+
+      return { success: true };
+    },
+  );
diff --git a/apps/web/utils/actions/settings.validation.ts b/apps/web/utils/actions/settings.validation.ts
index daa081a40a..8298481716 100644
--- a/apps/web/utils/actions/settings.validation.ts
+++ b/apps/web/utils/actions/settings.validation.ts
@@ -53,3 +53,10 @@ export const updateDigestItemsBody = z.object({
   coldEmailDigest: z.boolean().optional(),
 });
 export type UpdateDigestItemsBody = z.infer<typeof updateDigestItemsBody>;
+
+export const updateSystemLabelsBody = z.object({
+  needsReplyLabelId: z.string().optional(),
+  awaitingReplyLabelId: z.string().optional(),
+  coldEmailLabelId: z.string().optional(),
+});
+export type UpdateSystemLabelsBody = z.infer<typeof updateSystemLabelsBody>;
diff --git a/apps/web/utils/ai/actions.ts b/apps/web/utils/ai/actions.ts
index a219d0e10d..496703daf0 100644
--- a/apps/web/utils/ai/actions.ts
+++ b/apps/web/utils/ai/actions.ts
@@ -80,13 +80,29 @@ const archive: ActionFunction<Record<string, unknown>> = async ({
   await client.archiveThread(email.threadId, userEmail);
 };
 
-const label: ActionFunction<{ label?: string | null }> = async ({
-  client,
-  email,
-  args,
-}) => {
-  if (!args.label) return;
-  await client.labelMessage(email.id, args.label);
+const label: ActionFunction<{
+  label?: string | null;
+  labelId?: string | null;
+}> = async ({ client, email, args }) => {
+  let labelIdToUse = args.labelId;
+
+  // Lazy migration: If no labelId but label name exists, look it up
+  if (!labelIdToUse && args.label) {
+    const matchingLabel = await client.getLabelByName(args.label);
+
+    if (matchingLabel) {
+      labelIdToUse = matchingLabel.id;
+      // Note: We don't update the Action here to avoid race conditions
+      // The Action will be migrated when the rule is next updated
+    } else {
+      logger.warn("Label not found", { labelName: args.label });
+      return;
+    }
+  }
+
+  if (!labelIdToUse) return;
+
+  await client.labelMessage({ messageId: email.id, labelId: labelIdToUse });
 };
 
 const draft: ActionFunction<{
diff --git a/apps/web/utils/ai/assistant/chat.ts b/apps/web/utils/ai/assistant/chat.ts
index 2939aa2c20..628852a566 100644
--- a/apps/web/utils/ai/assistant/chat.ts
+++ b/apps/web/utils/ai/assistant/chat.ts
@@ -463,6 +463,7 @@ const updateRuleActionsTool = ({
           delayInMinutes: action.delayInMinutes ?? null,
         })),
         provider,
+        emailAccountId,
       });
 
       return {
diff --git a/apps/web/utils/assistant/process-assistant-email.ts b/apps/web/utils/assistant/process-assistant-email.ts
index 8a5d17c2bc..59e392c5e2 100644
--- a/apps/web/utils/assistant/process-assistant-email.ts
+++ b/apps/web/utils/assistant/process-assistant-email.ts
@@ -274,7 +274,7 @@ async function withProcessingLabels<T>(
 
   if (labels.length) {
     // Fire and forget the initial labeling
-    provider.labelMessage(messageId, labels[0]).catch((error) => {
+    provider.labelMessage({ messageId, labelId: labels[0] }).catch((error) => {
       logger.error("Error labeling message", { error });
     });
   }
diff --git a/apps/web/utils/cold-email/is-cold-email.test.ts b/apps/web/utils/cold-email/is-cold-email.test.ts
index 1105095cf0..9fe7d15559 100644
--- a/apps/web/utils/cold-email/is-cold-email.test.ts
+++ b/apps/web/utils/cold-email/is-cold-email.test.ts
@@ -4,6 +4,7 @@ import { ColdEmailSetting, ColdEmailStatus } from "@prisma/client";
 import { blockColdEmail } from "./is-cold-email";
 import { getEmailAccount } from "@/__tests__/helpers";
 import type { EmailProvider } from "@/utils/email/types";
+import { getOrCreateSystemLabelId } from "@/utils/label-config";
 
 // Mock dependencies
 vi.mock("server-only", () => ({}));
@@ -13,15 +14,25 @@ vi.mock("@/utils/prisma", () => ({
     coldEmail: {
       upsert: vi.fn(),
     },
+    emailAccount: {
+      findUnique: vi.fn(),
+      update: vi.fn(),
+    },
   },
 }));
 
+vi.mock("@/utils/label-config", () => ({
+  getOrCreateSystemLabelId: vi.fn(),
+}));
+
 describe("blockColdEmail", () => {
   const mockProvider = {
-    getOrCreateInboxZeroLabel: vi.fn(),
     labelMessage: vi.fn(),
     archiveThread: vi.fn(),
     markReadThread: vi.fn(),
+    moveThreadToFolder: vi.fn(),
+    getOrCreateOutlookFolderIdByName: vi.fn(),
+    name: "google",
   } as unknown as EmailProvider;
 
   const mockEmail = {
@@ -37,15 +48,12 @@ describe("blockColdEmail", () => {
 
   beforeEach(() => {
     vi.clearAllMocks();
+
+    // Mock getOrCreateSystemLabelId to return a label ID
+    vi.mocked(getOrCreateSystemLabelId).mockResolvedValue("label123");
   });
 
   it("should upsert cold email record in database", async () => {
-    vi.mocked(mockProvider.getOrCreateInboxZeroLabel).mockResolvedValue({
-      id: "label123",
-      name: "Cold Email",
-      type: "user",
-    });
-
     await blockColdEmail({
       provider: mockProvider,
       email: mockEmail,
@@ -73,12 +81,6 @@ describe("blockColdEmail", () => {
   });
 
   it("should add cold email label when coldEmailBlocker is LABEL", async () => {
-    vi.mocked(mockProvider.getOrCreateInboxZeroLabel).mockResolvedValue({
-      id: "label123",
-      name: "Cold Email",
-      type: "user",
-    });
-
     await blockColdEmail({
       provider: mockProvider,
       email: mockEmail,
@@ -86,13 +88,15 @@ describe("blockColdEmail", () => {
       aiReason: mockAiReason,
     });
 
-    expect(mockProvider.getOrCreateInboxZeroLabel).toHaveBeenCalledWith(
-      "cold_email",
-    );
-    expect(mockProvider.labelMessage).toHaveBeenCalledWith(
-      mockEmail.id,
-      "Cold Email",
-    );
+    expect(getOrCreateSystemLabelId).toHaveBeenCalledWith({
+      emailAccountId: mockEmailAccount.id,
+      type: "coldEmail",
+      provider: mockProvider,
+    });
+    expect(mockProvider.labelMessage).toHaveBeenCalledWith({
+      messageId: mockEmail.id,
+      labelId: "label123",
+    });
   });
 
   it("should archive email when coldEmailBlocker is ARCHIVE_AND_LABEL", async () => {
@@ -100,11 +104,6 @@ describe("blockColdEmail", () => {
       ...mockEmailAccount,
       coldEmailBlocker: ColdEmailSetting.ARCHIVE_AND_LABEL,
     };
-    vi.mocked(mockProvider.getOrCreateInboxZeroLabel).mockResolvedValue({
-      id: "label123",
-      name: "Cold Email",
-      type: "user",
-    });
 
     await blockColdEmail({
       provider: mockProvider,
@@ -113,10 +112,10 @@ describe("blockColdEmail", () => {
       aiReason: mockAiReason,
     });
 
-    expect(mockProvider.labelMessage).toHaveBeenCalledWith(
-      mockEmail.id,
-      "Cold Email",
-    );
+    expect(mockProvider.labelMessage).toHaveBeenCalledWith({
+      messageId: mockEmail.id,
+      labelId: "label123",
+    });
     expect(mockProvider.archiveThread).toHaveBeenCalledWith(
       mockEmail.threadId,
       userWithArchive.email,
@@ -128,11 +127,6 @@ describe("blockColdEmail", () => {
       ...mockEmailAccount,
       coldEmailBlocker: ColdEmailSetting.ARCHIVE_AND_READ_AND_LABEL,
     };
-    vi.mocked(mockProvider.getOrCreateInboxZeroLabel).mockResolvedValue({
-      id: "label123",
-      name: "Cold Email",
-      type: "user",
-    });
 
     await blockColdEmail({
       provider: mockProvider,
@@ -141,10 +135,10 @@ describe("blockColdEmail", () => {
       aiReason: mockAiReason,
     });
 
-    expect(mockProvider.labelMessage).toHaveBeenCalledWith(
-      mockEmail.id,
-      "Cold Email",
-    );
+    expect(mockProvider.labelMessage).toHaveBeenCalledWith({
+      messageId: mockEmail.id,
+      labelId: "label123",
+    });
     expect(mockProvider.archiveThread).toHaveBeenCalledWith(
       mockEmail.threadId,
       userWithArchiveAndRead.email,
@@ -169,11 +163,7 @@ describe("blockColdEmail", () => {
   });
 
   it("should handle missing label id", async () => {
-    vi.mocked(mockProvider.getOrCreateInboxZeroLabel).mockResolvedValue({
-      id: "",
-      name: "Cold Email",
-      type: "user",
-    });
+    vi.mocked(getOrCreateSystemLabelId).mockResolvedValue(null);
 
     await blockColdEmail({
       provider: mockProvider,
@@ -182,10 +172,8 @@ describe("blockColdEmail", () => {
       aiReason: mockAiReason,
     });
 
-    expect(mockProvider.labelMessage).toHaveBeenCalledWith(
-      mockEmail.id,
-      "Cold Email",
-    );
+    expect(getOrCreateSystemLabelId).toHaveBeenCalled();
+    expect(mockProvider.labelMessage).not.toHaveBeenCalled();
   });
 
   it("should not modify labels when coldEmailBlocker is DISABLED", async () => {
@@ -201,7 +189,7 @@ describe("blockColdEmail", () => {
       aiReason: mockAiReason,
     });
 
-    expect(mockProvider.getOrCreateInboxZeroLabel).not.toHaveBeenCalled();
+    expect(getOrCreateSystemLabelId).not.toHaveBeenCalled();
     expect(mockProvider.labelMessage).not.toHaveBeenCalled();
   });
 });
diff --git a/apps/web/utils/cold-email/is-cold-email.ts b/apps/web/utils/cold-email/is-cold-email.ts
index a324ba689f..0c30aeb66a 100644
--- a/apps/web/utils/cold-email/is-cold-email.ts
+++ b/apps/web/utils/cold-email/is-cold-email.ts
@@ -14,6 +14,7 @@ import type { EmailForLLM } from "@/utils/types";
 import type { EmailProvider } from "@/utils/email/types";
 import { getModel, type ModelType } from "@/utils/llms/model";
 import { createGenerateObject } from "@/utils/llms";
+import { getOrCreateSystemLabelId } from "@/utils/label-config";
 
 export const COLD_EMAIL_FOLDER_NAME = "Cold Emails";
 
@@ -221,9 +222,11 @@ export async function blockColdEmail(options: {
   ) {
     if (!emailAccount.email) throw new Error("User email is required");
 
-    // For Outlook, we'll use categories instead of labels
-    const coldEmailLabel =
-      await provider.getOrCreateInboxZeroLabel("cold_email");
+    const coldEmailLabelId = await getOrCreateSystemLabelId({
+      emailAccountId: emailAccount.id,
+      type: "coldEmail",
+      provider,
+    });
 
     const shouldArchive =
       emailAccount.coldEmailBlocker === ColdEmailSetting.ARCHIVE_AND_LABEL ||
@@ -234,10 +237,11 @@ export async function blockColdEmail(options: {
       emailAccount.coldEmailBlocker ===
       ColdEmailSetting.ARCHIVE_AND_READ_AND_LABEL;
 
-    // For Outlook, we'll use the provider's labelMessage method
-    // The provider will handle the differences between Gmail labels and Outlook categories
-    if (coldEmailLabel?.name) {
-      await provider.labelMessage(email.id, coldEmailLabel.name);
+    if (coldEmailLabelId) {
+      await provider.labelMessage({
+        messageId: email.id,
+        labelId: coldEmailLabelId,
+      });
     }
 
     // For archiving and marking as read, we'll need to implement these in the provider
diff --git a/apps/web/utils/email/google.ts b/apps/web/utils/email/google.ts
index 68cbd33f31..6fc660ba38 100644
--- a/apps/web/utils/email/google.ts
+++ b/apps/web/utils/email/google.ts
@@ -1,9 +1,5 @@
 import type { gmail_v1 } from "@googleapis/gmail";
-import {
-  isDefined,
-  type MessageWithPayload,
-  type ParsedMessage,
-} from "@/utils/types";
+import type { MessageWithPayload, ParsedMessage } from "@/utils/types";
 import { parseMessage } from "@/utils/gmail/message";
 import {
   getMessage,
@@ -13,12 +9,11 @@ import {
 } from "@/utils/gmail/message";
 import {
   getLabels,
+  getLabel,
   getLabelById,
   createLabel,
   getOrCreateInboxZeroLabel,
   GmailLabel,
-  getNeedsReplyLabel,
-  getAwaitingReplyLabel,
 } from "@/utils/gmail/label";
 import { labelVisibility, messageVisibility } from "@/utils/gmail/constants";
 import type { InboxZeroLabel } from "@/utils/label";
@@ -33,7 +28,6 @@ import {
 } from "@/utils/gmail/mail";
 import {
   archiveThread,
-  getOrCreateLabel,
   labelMessage,
   markReadThread,
   removeThreadLabel,
@@ -147,6 +141,19 @@ export class GmailProvider implements EmailProvider {
     }
   }
 
+  async getLabelByName(name: string): Promise<EmailLabel | null> {
+    const label = await getLabel({ gmail: this.client, name });
+    if (!label) return null;
+    return {
+      id: label.id!,
+      name: label.name!,
+      type: label.type!,
+      threadsTotal: label.threadsTotal || undefined,
+      labelListVisibility: label.labelListVisibility || undefined,
+      messageListVisibility: label.messageListVisibility || undefined,
+    };
+  }
+
   async getMessage(messageId: string): Promise<ParsedMessage> {
     const message = await getMessage(messageId, this.client, "full");
     return parseMessage(message);
@@ -241,7 +248,7 @@ export class GmailProvider implements EmailProvider {
     threadId: string,
     ownerEmail: string,
     actionSource: "user" | "automation",
-  ): Promise<void> {
+  ) {
     await trashThread({
       gmail: this.client,
       threadId,
@@ -250,17 +257,17 @@ export class GmailProvider implements EmailProvider {
     });
   }
 
-  async labelMessage(messageId: string, labelName: string): Promise<void> {
-    const label = await getOrCreateLabel({
-      gmail: this.client,
-      name: labelName,
-    });
-    if (!label.id)
-      throw new Error("Label not found and unable to create label");
+  async labelMessage({
+    messageId,
+    labelId,
+  }: {
+    messageId: string;
+    labelId: string;
+  }) {
     await labelMessage({
       gmail: this.client,
       messageId,
-      addLabelIds: [label.id],
+      addLabelIds: [labelId],
     });
   }
 
@@ -377,32 +384,6 @@ export class GmailProvider implements EmailProvider {
     await removeThreadLabel(this.client, threadId, labelId);
   }
 
-  async getAwaitingReplyLabel(): Promise<string | null> {
-    return getAwaitingReplyLabel(this.client);
-  }
-
-  async getNeedsReplyLabel(): Promise<string | null> {
-    return getNeedsReplyLabel(this.client);
-  }
-
-  async removeAwaitingReplyLabel(threadId: string): Promise<void> {
-    const awaitingReplyLabelId = await this.getAwaitingReplyLabel();
-    if (!awaitingReplyLabelId) {
-      logger.warn("No awaiting reply label found");
-      return;
-    }
-    await removeThreadLabel(this.client, threadId, awaitingReplyLabelId);
-  }
-
-  async removeNeedsReplyLabel(threadId: string): Promise<void> {
-    const needsReplyLabelId = await this.getNeedsReplyLabel();
-    if (!needsReplyLabelId) {
-      logger.warn("No needs reply label found");
-      return;
-    }
-    await removeThreadLabel(this.client, threadId, needsReplyLabelId);
-  }
-
   async createLabel(name: string): Promise<EmailLabel> {
     const label = await createLabel({
       gmail: this.client,
@@ -842,19 +823,6 @@ export class GmailProvider implements EmailProvider {
     );
   }
 
-  async labelAwaitingReply(messageId: string): Promise<void> {
-    const awaitingReplyLabelId = await this.getAwaitingReplyLabel();
-    if (!awaitingReplyLabelId) {
-      logger.warn("No awaiting reply label found");
-      return;
-    }
-    await labelMessage({
-      gmail: this.client,
-      messageId,
-      addLabelIds: [awaitingReplyLabelId],
-    });
-  }
-
   async processHistory(options: {
     emailAddress: string;
     historyId?: number;
diff --git a/apps/web/utils/email/microsoft.ts b/apps/web/utils/email/microsoft.ts
index 1cec23c6d3..a5378c0818 100644
--- a/apps/web/utils/email/microsoft.ts
+++ b/apps/web/utils/email/microsoft.ts
@@ -9,6 +9,7 @@ import {
 } from "@/utils/outlook/message";
 import {
   getLabels,
+  getLabel,
   createLabel,
   getOrCreateInboxZeroLabel,
   getLabelById,
@@ -24,7 +25,6 @@ import {
 } from "@/utils/outlook/mail";
 import {
   archiveThread,
-  getOrCreateLabel,
   labelMessage,
   markReadThread,
   removeThreadLabel,
@@ -38,11 +38,6 @@ import {
   getThreadsFromSenderWithSubject,
 } from "@/utils/outlook/thread";
 import { getOutlookAttachment } from "@/utils/outlook/attachment";
-import { getOrCreateLabels } from "@/utils/outlook/label";
-import {
-  AWAITING_REPLY_LABEL_NAME,
-  NEEDS_REPLY_LABEL_NAME,
-} from "@/utils/reply-tracker/consts";
 import { getDraft, deleteDraft } from "@/utils/outlook/draft";
 import {
   getFiltersList,
@@ -127,6 +122,16 @@ export class OutlookProvider implements EmailProvider {
     return labels.find((label) => label.id === labelId) || null;
   }
 
+  async getLabelByName(name: string): Promise<EmailLabel | null> {
+    const category = await getLabel({ client: this.client, name });
+    if (!category) return null;
+    return {
+      id: category.id || "",
+      name: category.displayName || "",
+      type: "user",
+    };
+  }
+
   async getMessage(messageId: string): Promise<ParsedMessage> {
     try {
       const message = await getMessage(messageId, this.client);
@@ -297,15 +302,21 @@ export class OutlookProvider implements EmailProvider {
     });
   }
 
-  async labelMessage(messageId: string, labelName: string): Promise<void> {
-    const label = await getOrCreateLabel({
-      client: this.client,
-      name: labelName,
-    });
+  async labelMessage({
+    messageId,
+    labelId,
+  }: {
+    messageId: string;
+    labelId: string;
+  }) {
+    const category = await this.getLabelById(labelId);
+    if (!category) {
+      throw new Error(`Category with ID ${labelId} not found`);
+    }
     await labelMessage({
       client: this.client,
       messageId,
-      categories: [label.displayName || ""],
+      categories: [category.name],
     });
   }
 
@@ -1066,44 +1077,6 @@ export class OutlookProvider implements EmailProvider {
     return getThreadsFromSenderWithSubject(this.client, sender, limit);
   }
 
-  async getNeedsReplyLabel(): Promise<string | null> {
-    const [needsReplyLabel] = await getOrCreateLabels({
-      client: this.client,
-      names: [NEEDS_REPLY_LABEL_NAME],
-    });
-
-    return needsReplyLabel.id || null;
-  }
-
-  async getAwaitingReplyLabel(): Promise<string | null> {
-    const [awaitingReplyLabel] = await getOrCreateLabels({
-      client: this.client,
-      names: [AWAITING_REPLY_LABEL_NAME],
-    });
-
-    return awaitingReplyLabel.id || null;
-  }
-
-  async labelAwaitingReply(messageId: string): Promise<void> {
-    await this.labelMessage(messageId, AWAITING_REPLY_LABEL_NAME);
-  }
-
-  async removeAwaitingReplyLabel(threadId: string): Promise<void> {
-    await removeThreadLabel({
-      client: this.client,
-      threadId,
-      categoryName: AWAITING_REPLY_LABEL_NAME,
-    });
-  }
-
-  async removeNeedsReplyLabel(threadId: string): Promise<void> {
-    await removeThreadLabel({
-      client: this.client,
-      threadId,
-      categoryName: NEEDS_REPLY_LABEL_NAME,
-    });
-  }
-
   async processHistory(options: {
     emailAddress: string;
     historyId?: number;
diff --git a/apps/web/utils/email/types.ts b/apps/web/utils/email/types.ts
index aa803dac3e..2168dc7031 100644
--- a/apps/web/utils/email/types.ts
+++ b/apps/web/utils/email/types.ts
@@ -46,6 +46,7 @@ export interface EmailProvider {
   getThread(threadId: string): Promise<EmailThread>;
   getLabels(): Promise<EmailLabel[]>;
   getLabelById(labelId: string): Promise<EmailLabel | null>;
+  getLabelByName(name: string): Promise<EmailLabel | null>;
   getMessage(messageId: string): Promise<ParsedMessage>;
   getMessagesByFields(options: {
     froms?: string[];
@@ -86,14 +87,8 @@ export interface EmailProvider {
     ownerEmail: string,
     actionSource: "user" | "automation",
   ): Promise<void>;
-  labelMessage(messageId: string, labelName: string): Promise<void>;
-
+  labelMessage(options: { messageId: string; labelId: string }): Promise<void>;
   removeThreadLabel(threadId: string, labelId: string): Promise<void>;
-  getNeedsReplyLabel(): Promise<string | null>;
-  getAwaitingReplyLabel(): Promise<string | null>;
-  labelAwaitingReply(messageId: string): Promise<void>;
-  removeAwaitingReplyLabel(threadId: string): Promise<void>;
-  removeNeedsReplyLabel(threadId: string): Promise<void>;
   draftEmail(
     email: ParsedMessage,
     args: { to?: string; subject?: string; content: string },
diff --git a/apps/web/utils/gmail/label.ts b/apps/web/utils/gmail/label.ts
index 72487e666a..2e65566ca8 100644
--- a/apps/web/utils/gmail/label.ts
+++ b/apps/web/utils/gmail/label.ts
@@ -252,59 +252,6 @@ export async function getLabelById(options: {
   return (await gmail.users.labels.get({ userId: "me", id })).data;
 }
 
-export async function getOrCreateLabel({
-  gmail,
-  name,
-}: {
-  gmail: gmail_v1.Gmail;
-  name: string;
-}) {
-  if (!name?.trim()) throw new Error("Label name cannot be empty");
-  const label = await getLabel({ gmail, name });
-  if (label) return label;
-  const createdLabel = await createLabel({ gmail, name });
-  return createdLabel;
-}
-
-// More efficient way to get or create multiple labels, so we fetch labels only once
-export async function getOrCreateLabels({
-  gmail,
-  names,
-}: {
-  gmail: gmail_v1.Gmail;
-  names: string[];
-}): Promise<gmail_v1.Schema$Label[]> {
-  if (!names.length) return [];
-
-  // Validate names
-  const emptyNames = names.filter((name) => !name?.trim());
-  if (emptyNames.length) throw new Error("Label names cannot be empty");
-
-  // Fetch labels once
-  const existingLabels = (await getLabels(gmail)) || [];
-  const normalizedNames = names.map(normalizeLabel);
-
-  // Find existing labels
-  const labelMap = new Map<string, gmail_v1.Schema$Label>();
-  existingLabels.forEach((label) => {
-    if (label.name) {
-      labelMap.set(normalizeLabel(label.name), label);
-    }
-  });
-
-  // Create missing labels
-  const results = await Promise.all(
-    normalizedNames.map(async (normalizedName, index) => {
-      const existingLabel = labelMap.get(normalizedName);
-      if (existingLabel) return existingLabel;
-
-      return createLabel({ gmail, name: names[index] });
-    }),
-  );
-
-  return results;
-}
-
 export async function getOrCreateInboxZeroLabel({
   gmail,
   key,
@@ -339,23 +286,3 @@ export async function getOrCreateInboxZeroLabel({
   });
   return createdLabel;
 }
-
-export async function getAwaitingReplyLabel(
-  gmail: gmail_v1.Gmail,
-): Promise<string | null> {
-  const [awaitingReplyLabel] = await getOrCreateLabels({
-    gmail,
-    names: [AWAITING_REPLY_LABEL_NAME],
-  });
-  return awaitingReplyLabel.id || "";
-}
-
-export async function getNeedsReplyLabel(
-  gmail: gmail_v1.Gmail,
-): Promise<string | null> {
-  const [toReplyLabel] = await getOrCreateLabels({
-    gmail,
-    names: [NEEDS_REPLY_LABEL_NAME],
-  });
-  return toReplyLabel.id || "";
-}
diff --git a/apps/web/utils/label-config.ts b/apps/web/utils/label-config.ts
new file mode 100644
index 0000000000..aac139895a
--- /dev/null
+++ b/apps/web/utils/label-config.ts
@@ -0,0 +1,140 @@
+import prisma from "@/utils/prisma";
+import type { EmailProvider } from "@/utils/email/types";
+import { createScopedLogger } from "@/utils/logger";
+import {
+  NEEDS_REPLY_LABEL_NAME,
+  AWAITING_REPLY_LABEL_NAME,
+} from "@/utils/reply-tracker/consts";
+import { inboxZeroLabels } from "@/utils/label";
+import { ActionType, SystemType } from "@prisma/client";
+
+const logger = createScopedLogger("label-config");
+
+type SystemLabelType = "needsReply" | "awaitingReply" | "coldEmail";
+
+export async function getOrCreateSystemLabelId(options: {
+  emailAccountId: string;
+  type: SystemLabelType;
+  provider: EmailProvider;
+}): Promise<string | null> {
+  const { emailAccountId, type, provider } = options;
+
+  const existingId = await getSystemLabelId({ emailAccountId, type });
+  if (existingId) {
+    return existingId;
+  }
+
+  const labelNames = {
+    needsReply: NEEDS_REPLY_LABEL_NAME,
+    awaitingReply: AWAITING_REPLY_LABEL_NAME,
+    coldEmail: inboxZeroLabels.cold_email.name,
+  };
+
+  const labelName = labelNames[type];
+
+  try {
+    let label = await provider.getLabelByName(labelName);
+
+    if (!label) {
+      logger.info("Creating system label", { type, name: labelName });
+      label = await provider.createLabel(labelName);
+    }
+
+    await updateSystemLabelId({
+      emailAccountId,
+      type,
+      labelId: label.id,
+    });
+
+    return label.id;
+  } catch (error) {
+    logger.error("Failed to get or create system label", { type, error });
+    return null;
+  }
+}
+
+async function getSystemLabelId(options: {
+  emailAccountId: string;
+  type: SystemLabelType;
+}): Promise<string | null> {
+  const { emailAccountId, type } = options;
+
+  const emailAccount = await prisma.emailAccount.findUnique({
+    where: { id: emailAccountId },
+    select: {
+      needsReplyLabelId: true,
+      awaitingReplyLabelId: true,
+      coldEmailLabelId: true,
+    },
+  });
+
+  if (!emailAccount) return null;
+
+  switch (type) {
+    case "needsReply":
+      return emailAccount.needsReplyLabelId;
+    case "awaitingReply":
+      return emailAccount.awaitingReplyLabelId;
+    case "coldEmail":
+      return emailAccount.coldEmailLabelId;
+    default: {
+      const exhaustiveCheck: never = type;
+      return exhaustiveCheck;
+    }
+  }
+}
+
+async function updateSystemLabelId(options: {
+  emailAccountId: string;
+  type: SystemLabelType;
+  labelId: string;
+}): Promise<void> {
+  const { emailAccountId, type, labelId } = options;
+
+  const fieldMap = {
+    needsReply: "needsReplyLabelId",
+    awaitingReply: "awaitingReplyLabelId",
+    coldEmail: "coldEmailLabelId",
+  } as const;
+
+  const field = fieldMap[type];
+
+  await prisma.emailAccount.update({
+    where: { id: emailAccountId },
+    data: { [field]: labelId },
+  });
+
+  await updateAffectedRules({ emailAccountId, type, labelId });
+}
+
+async function updateAffectedRules(options: {
+  emailAccountId: string;
+  type: SystemLabelType;
+  labelId: string;
+}): Promise<void> {
+  const { emailAccountId, type, labelId } = options;
+
+  // Only update rules for needsReply type (TO_REPLY system type)
+  if (type !== "needsReply") return;
+
+  const rules = await prisma.rule.findMany({
+    where: {
+      emailAccountId,
+      systemType: SystemType.TO_REPLY,
+    },
+    include: {
+      actions: {
+        where: { type: ActionType.LABEL },
+      },
+    },
+  });
+
+  for (const rule of rules) {
+    for (const action of rule.actions) {
+      await prisma.action.update({
+        where: { id: action.id },
+        data: { labelId },
+      });
+    }
+  }
+}
diff --git a/apps/web/utils/label/resolve-label.ts b/apps/web/utils/label/resolve-label.ts
new file mode 100644
index 0000000000..8ba60c6288
--- /dev/null
+++ b/apps/web/utils/label/resolve-label.ts
@@ -0,0 +1,52 @@
+import type { EmailProvider } from "@/utils/email/types";
+
+/**
+ * Resolves label name and ID pairing for a label action.
+ * - If only label name is provided, looks up the labelId
+ * - If only labelId is provided, looks up the label name
+ * - If both are provided, returns both
+ * - Returns null for both if lookup fails
+ */
+export async function resolveLabelNameAndId({
+  emailProvider,
+  label,
+  labelId,
+}: {
+  emailProvider: EmailProvider;
+  label?: string | null;
+  labelId?: string | null;
+}): Promise<{ label: string | null; labelId: string | null }> {
+  // If we have both, return them
+  if (label && labelId) {
+    return { label, labelId };
+  }
+
+  // If we have label name, look up the ID
+  if (label) {
+    try {
+      const foundLabel = await emailProvider.getLabelByName(label);
+      return {
+        label,
+        labelId: foundLabel?.id ?? null,
+      };
+    } catch {
+      return { label, labelId: null };
+    }
+  }
+
+  // If we have labelId, look up the name
+  if (labelId) {
+    try {
+      const foundLabel = await emailProvider.getLabelById(labelId);
+      return {
+        label: foundLabel?.name ?? null,
+        labelId,
+      };
+    } catch {
+      return { label: null, labelId };
+    }
+  }
+
+  // Neither provided
+  return { label: null, labelId: null };
+}
diff --git a/apps/web/utils/reply-tracker/enable.ts b/apps/web/utils/reply-tracker/enable.ts
index 92f64932c9..dd3172a3cc 100644
--- a/apps/web/utils/reply-tracker/enable.ts
+++ b/apps/web/utils/reply-tracker/enable.ts
@@ -1,6 +1,6 @@
 import prisma from "@/utils/prisma";
-import { safeCreateRule } from "@/utils/rule/rule";
 import { ActionType, SystemType, type Prisma } from "@prisma/client";
+import { safeCreateRule } from "@/utils/rule/rule";
 import {
   defaultReplyTrackerInstructions,
   NEEDS_REPLY_LABEL_NAME,
@@ -8,6 +8,8 @@ import {
 import { createScopedLogger } from "@/utils/logger";
 import { RuleName } from "@/utils/rule/consts";
 import { SafeError } from "@/utils/error";
+import { createEmailProvider } from "@/utils/email/provider";
+import { resolveLabelNameAndId } from "@/utils/label/resolve-label";
 
 export async function enableReplyTracker({
   emailAccountId,
@@ -31,6 +33,7 @@ export async function enableReplyTracker({
       email: true,
       about: true,
       rulesPrompt: true,
+      needsReplyLabelId: true,
       user: {
         select: {
           aiProvider: true,
@@ -70,6 +73,19 @@ export async function enableReplyTracker({
 
   let ruleId: string | null = rule?.id || null;
 
+  const emailProvider = await createEmailProvider({
+    emailAccountId,
+    provider,
+  });
+
+  // Use the user's configured system label, or fall back to default label name
+  const { label: needsReplyLabel, labelId: needsReplyLabelId } =
+    await resolveLabelNameAndId({
+      emailProvider,
+      label: emailAccount.needsReplyLabelId ? null : NEEDS_REPLY_LABEL_NAME,
+      labelId: emailAccount.needsReplyLabelId,
+    });
+
   // If rule found, update/create the label action to NEEDS_REPLY_LABEL
   if (rule) {
     const labelAction = rule.actions.find((a) => a.type === ActionType.LABEL);
@@ -77,13 +93,17 @@ export async function enableReplyTracker({
     if (labelAction) {
       await prisma.action.update({
         where: { id: labelAction.id },
-        data: { label: NEEDS_REPLY_LABEL_NAME },
+        data: {
+          label: needsReplyLabel,
+          labelId: needsReplyLabelId,
+        },
       });
     } else {
       await prisma.action.create({
         data: {
           type: ActionType.LABEL,
-          label: NEEDS_REPLY_LABEL_NAME,
+          label: needsReplyLabel,
+          labelId: needsReplyLabelId,
           rule: { connect: { id: rule.id } },
         },
       });
@@ -144,6 +164,22 @@ export async function createToReplyRule(
   addDigest: boolean,
   provider: string,
 ) {
+  const emailProvider = await createEmailProvider({
+    emailAccountId,
+    provider,
+  });
+
+  const emailAccount = await prisma.emailAccount.findUnique({
+    where: { id: emailAccountId },
+    select: { needsReplyLabelId: true },
+  });
+
+  const labelInfo = await resolveLabelNameAndId({
+    emailProvider,
+    label: emailAccount?.needsReplyLabelId ? null : NEEDS_REPLY_LABEL_NAME,
+    labelId: emailAccount?.needsReplyLabelId,
+  });
+
   return await safeCreateRule({
     result: {
       name: RuleName.ToReply,
@@ -155,8 +191,9 @@ export async function createToReplyRule(
       actions: [
         {
           type: ActionType.LABEL,
+          labelId: labelInfo.labelId,
           fields: {
-            label: NEEDS_REPLY_LABEL_NAME,
+            label: labelInfo.label,
             to: null,
             subject: null,
             content: null,
diff --git a/apps/web/utils/reply-tracker/inbound.ts b/apps/web/utils/reply-tracker/inbound.ts
index bdfe704a93..88f1ec0fb1 100644
--- a/apps/web/utils/reply-tracker/inbound.ts
+++ b/apps/web/utils/reply-tracker/inbound.ts
@@ -8,6 +8,7 @@ import { getEmailForLLM } from "@/utils/get-email-from-message";
 import { aiChooseRule } from "@/utils/ai/choose-rule/ai-choose-rule";
 import { filterToReplyPreset } from "@/utils/ai/choose-rule/match-rules";
 import type { EmailProvider } from "@/utils/email/types";
+import { removeAwaitingReplyLabelFromThread } from "./label-helpers";
 
 /**
  * Marks an email thread as needing a reply.
@@ -44,7 +45,11 @@ export async function coordinateReplyProcess({
     sentAt,
   });
 
-  const labelsPromise = client.removeAwaitingReplyLabel(threadId);
+  const labelsPromise = removeAwaitingReplyLabelFromThread({
+    emailAccountId,
+    threadId,
+    provider: client,
+  });
 
   const [dbResult, labelsResult] = await Promise.allSettled([
     dbPromise,
diff --git a/apps/web/utils/reply-tracker/label-helpers.ts b/apps/web/utils/reply-tracker/label-helpers.ts
new file mode 100644
index 0000000000..361cf61669
--- /dev/null
+++ b/apps/web/utils/reply-tracker/label-helpers.ts
@@ -0,0 +1,66 @@
+import type { EmailProvider } from "@/utils/email/types";
+import { getOrCreateSystemLabelId } from "@/utils/label-config";
+import { createScopedLogger } from "@/utils/logger";
+
+const logger = createScopedLogger("reply-tracker-labels");
+
+export async function labelMessageAsAwaitingReply(options: {
+  emailAccountId: string;
+  messageId: string;
+  provider: EmailProvider;
+}): Promise<void> {
+  const { emailAccountId, messageId, provider } = options;
+
+  const labelId = await getOrCreateSystemLabelId({
+    emailAccountId,
+    type: "awaitingReply",
+    provider,
+  });
+
+  if (!labelId) {
+    logger.error("Failed to get or create awaiting reply label");
+    return;
+  }
+
+  await provider.labelMessage({ messageId, labelId });
+}
+
+export async function removeAwaitingReplyLabelFromThread(options: {
+  emailAccountId: string;
+  threadId: string;
+  provider: EmailProvider;
+}): Promise<void> {
+  const { emailAccountId, threadId, provider } = options;
+
+  const labelId = await getOrCreateSystemLabelId({
+    emailAccountId,
+    type: "awaitingReply",
+    provider,
+  });
+
+  if (!labelId) {
+    return;
+  }
+
+  await provider.removeThreadLabel(threadId, labelId);
+}
+
+export async function removeNeedsReplyLabelFromThread(options: {
+  emailAccountId: string;
+  threadId: string;
+  provider: EmailProvider;
+}): Promise<void> {
+  const { emailAccountId, threadId, provider } = options;
+
+  const labelId = await getOrCreateSystemLabelId({
+    emailAccountId,
+    type: "needsReply",
+    provider,
+  });
+
+  if (!labelId) {
+    return;
+  }
+
+  await provider.removeThreadLabel(threadId, labelId);
+}
diff --git a/apps/web/utils/reply-tracker/outbound.ts b/apps/web/utils/reply-tracker/outbound.ts
index 7c1b982b9b..beacfbdee9 100644
--- a/apps/web/utils/reply-tracker/outbound.ts
+++ b/apps/web/utils/reply-tracker/outbound.ts
@@ -7,6 +7,10 @@ import { createScopedLogger, type Logger } from "@/utils/logger";
 import { getEmailForLLM } from "@/utils/get-email-from-message";
 import { internalDateToDate } from "@/utils/date";
 import type { EmailProvider } from "@/utils/email/types";
+import {
+  labelMessageAsAwaitingReply,
+  removeNeedsReplyLabelFromThread,
+} from "./label-helpers";
 
 export async function handleOutboundReply({
   emailAccount,
@@ -114,7 +118,11 @@ async function createReplyTrackerOutbound({
     },
   });
 
-  const labelPromise = provider.labelAwaitingReply(messageId);
+  const labelPromise = labelMessageAsAwaitingReply({
+    emailAccountId,
+    messageId,
+    provider,
+  });
 
   const [upsertResult, labelResult] = await Promise.allSettled([
     upsertPromise,
@@ -151,7 +159,11 @@ async function resolveReplyTrackers(
     },
   });
 
-  const labelPromise = provider.removeNeedsReplyLabel(threadId);
+  const labelPromise = removeNeedsReplyLabelFromThread({
+    emailAccountId,
+    threadId,
+    provider,
+  });
 
   await Promise.allSettled([updateDbPromise, labelPromise]);
 }
diff --git a/apps/web/utils/rule/rule.ts b/apps/web/utils/rule/rule.ts
index 593089d6dc..9e25e595a5 100644
--- a/apps/web/utils/rule/rule.ts
+++ b/apps/web/utils/rule/rule.ts
@@ -14,6 +14,9 @@ import { hasExampleParams } from "@/app/(app)/[emailAccountId]/assistant/example
 import { SafeError } from "@/utils/error";
 import { createRuleHistory } from "@/utils/rule/rule-history";
 import { isMicrosoftProvider } from "@/utils/email/provider-types";
+import { createEmailProvider } from "@/utils/email/provider";
+import type { EmailProvider } from "@/utils/email/types";
+import { resolveLabelNameAndId } from "@/utils/label/resolve-label";
 
 const logger = createScopedLogger("rule");
 
@@ -31,6 +34,16 @@ export function partialUpdateRule({
   });
 }
 
+// Extended type for system rules that can include labelId
+type CreateRuleWithLabelId = Omit<
+  CreateOrUpdateRuleSchemaWithCategories,
+  "actions"
+> & {
+  actions: (CreateOrUpdateRuleSchemaWithCategories["actions"][number] & {
+    labelId?: string | null;
+  })[];
+};
+
 export async function safeCreateRule({
   result,
   emailAccountId,
@@ -40,7 +53,7 @@ export async function safeCreateRule({
   triggerType = "ai_creation",
   shouldCreateIfDuplicate,
 }: {
-  result: CreateOrUpdateRuleSchemaWithCategories;
+  result: CreateRuleWithLabelId;
   emailAccountId: string;
   provider: string;
   categoryNames?: string[] | null;
@@ -164,7 +177,11 @@ export async function createRule({
   triggerType?: "ai_creation" | "manual_creation" | "system_creation";
   provider: string;
 }) {
-  const mappedActions = mapActionFields(result.actions, provider);
+  const mappedActions = await mapActionFields(
+    result.actions,
+    provider,
+    emailAccountId,
+  );
 
   const rule = await prisma.rule.create({
     data: {
@@ -231,7 +248,9 @@ async function updateRule({
       // but if we add relations to `Action`, we would need to `update` here instead of `deleteMany` and `createMany` to avoid cascading deletes
       actions: {
         deleteMany: {},
-        createMany: { data: mapActionFields(result.actions, provider) },
+        createMany: {
+          data: await mapActionFields(result.actions, provider, emailAccountId),
+        },
       },
       conditionalOperator: result.condition.conditionalOperator ?? undefined,
       instructions: result.condition.aiInstructions,
@@ -260,17 +279,21 @@ export async function updateRuleActions({
   ruleId,
   actions,
   provider,
+  emailAccountId,
 }: {
   ruleId: string;
   actions: CreateOrUpdateRuleSchemaWithCategories["actions"];
   provider: string;
+  emailAccountId: string;
 }) {
   return prisma.rule.update({
     where: { id: ruleId },
     data: {
       actions: {
         deleteMany: {},
-        createMany: { data: mapActionFields(actions, provider) },
+        createMany: {
+          data: await mapActionFields(actions, provider, emailAccountId),
+        },
       },
     },
   });
@@ -361,24 +384,50 @@ export async function removeRuleCategories(
   });
 }
 
-function mapActionFields(
-  actions: CreateOrUpdateRuleSchemaWithCategories["actions"],
+async function mapActionFields(
+  actions: (CreateOrUpdateRuleSchemaWithCategories["actions"][number] & {
+    labelId?: string | null;
+  })[],
   provider: string,
+  emailAccountId: string,
 ) {
-  return actions.map(
-    (a): Prisma.ActionCreateManyRuleInput => ({
-      type: a.type,
-      label: a.fields?.label,
-      to: a.fields?.to,
-      cc: a.fields?.cc,
-      bcc: a.fields?.bcc,
-      subject: a.fields?.subject,
-      content: a.fields?.content,
-      url: a.fields?.webhookUrl,
-      ...(isMicrosoftProvider(provider) && {
-        folderName: a.fields?.folderName as string | null,
-      }),
-      delayInMinutes: a.delayInMinutes,
-    }),
+  const actionPromises = actions.map(
+    async (a): Promise<Prisma.ActionCreateManyRuleInput> => {
+      let label = a.fields?.label;
+      let labelId: string | null = null;
+
+      if (a.type === ActionType.LABEL) {
+        const emailProvider = await createEmailProvider({
+          emailAccountId,
+          provider,
+        });
+
+        const resolved = await resolveLabelNameAndId({
+          emailProvider,
+          label: a.fields?.label || null,
+          labelId: a.labelId || null,
+        });
+        label = resolved.label;
+        labelId = resolved.labelId;
+      }
+
+      return {
+        type: a.type,
+        label,
+        labelId,
+        to: a.fields?.to,
+        cc: a.fields?.cc,
+        bcc: a.fields?.bcc,
+        subject: a.fields?.subject,
+        content: a.fields?.content,
+        url: a.fields?.webhookUrl,
+        ...(isMicrosoftProvider(provider) && {
+          folderName: a.fields?.folderName as string | null,
+        }),
+        delayInMinutes: a.delayInMinutes,
+      };
+    },
   );
+
+  return Promise.all(actionPromises);
 }
diff --git a/version.txt b/version.txt
index 84c01c732a..d4174a4e19 100644
--- a/version.txt
+++ b/version.txt
@@ -1 +1 @@
-v2.13.9
+v2.14.0