diff --git a/web/core/components/issues/issue-detail/label/root.tsx b/web/core/components/issues/issue-detail/label/root.tsx
index f71e9ba3ce2..f31defafd44 100644
--- a/web/core/components/issues/issue-detail/label/root.tsx
+++ b/web/core/components/issues/issue-detail/label/root.tsx
@@ -7,13 +7,12 @@ import { IIssueLabel, TIssue, TIssueServiceType } from "@plane/types";
 // components
 import { TOAST_TYPE, setToast } from "@plane/ui";
 // hooks
-import { useIssueDetail, useLabel, useProjectInbox, useUserPermissions } from "@/hooks/store";
+import { useIssueDetail, useLabel, useProjectInbox } from "@/hooks/store";
 // ui
 // types
-import { LabelList, LabelCreate, IssueLabelSelectRoot } from "./";
+import { LabelList, IssueLabelSelectRoot } from "./";
 // TODO: Fix this import statement, as core should not import from ee
 // eslint-disable-next-line import/order
-import { EUserPermissions, EUserPermissionsLevel } from "ee/constants/user-permissions";
 
 export type TIssueLabel = {
   workspaceSlug: string;
@@ -47,9 +46,7 @@ export const IssueLabel: FC<TIssueLabel> = observer((props) => {
     issue: { getIssueById },
   } = useIssueDetail(issueServiceType);
   const { getIssueInboxByIssueId } = useProjectInbox();
-  const { allowPermissions } = useUserPermissions();
 
-  const canCreateLabel = allowPermissions([EUserPermissions.ADMIN], EUserPermissionsLevel.PROJECT);
   const issue = isInboxIssue ? getIssueInboxByIssueId(issueId)?.issue : getIssueById(issueId);
 
   const labelOperations: TLabelOperations = useMemo(
@@ -113,16 +110,6 @@ export const IssueLabel: FC<TIssueLabel> = observer((props) => {
           labelOperations={labelOperations}
         />
       )}
-
-      {!disabled && canCreateLabel && (
-        <LabelCreate
-          workspaceSlug={workspaceSlug}
-          projectId={projectId}
-          issueId={issueId}
-          values={issue?.label_ids || []}
-          labelOperations={labelOperations}
-        />
-      )}
     </div>
   );
 });
diff --git a/web/core/components/issues/issue-detail/label/select/label-select.tsx b/web/core/components/issues/issue-detail/label/select/label-select.tsx
index 7fd700398c1..39c76180937 100644
--- a/web/core/components/issues/issue-detail/label/select/label-select.tsx
+++ b/web/core/components/issues/issue-detail/label/select/label-select.tsx
@@ -1,33 +1,40 @@
 import { Fragment, useState } from "react";
 import { observer } from "mobx-react";
 import { usePopper } from "react-popper";
-import { Check, Search, Tag } from "lucide-react";
+import { Check, Loader, Search, Tag } from "lucide-react";
 import { Combobox } from "@headlessui/react";
 // helpers
+import { IIssueLabel } from "@plane/types";
+import { getRandomLabelColor } from "@/constants/label";
 import { getTabIndex } from "@/helpers/tab-indices.helper";
 // hooks
-import { useLabel } from "@/hooks/store";
+import { useLabel, useUserPermissions } from "@/hooks/store";
 import { usePlatformOS } from "@/hooks/use-platform-os";
-// components
-
+import { EUserPermissions, EUserPermissionsLevel } from "ee/constants/user-permissions";
+//constants
 export interface IIssueLabelSelect {
   workspaceSlug: string;
   projectId: string;
   issueId: string;
   values: string[];
   onSelect: (_labelIds: string[]) => void;
+  onAddLabel: (workspaceSlug: string, projectId: string, data: Partial<IIssueLabel>) => Promise<any>;
 }
 
 export const IssueLabelSelect: React.FC<IIssueLabelSelect> = observer((props) => {
-  const { workspaceSlug, projectId, issueId, values, onSelect } = props;
+  const { workspaceSlug, projectId, issueId, values, onSelect, onAddLabel } = props;
   // store hooks
   const { isMobile } = usePlatformOS();
   const { fetchProjectLabels, getProjectLabels } = useLabel();
+  const { allowPermissions } = useUserPermissions();
   // states
   const [referenceElement, setReferenceElement] = useState<HTMLButtonElement | null>(null);
   const [popperElement, setPopperElement] = useState<HTMLDivElement | null>(null);
   const [isLoading, setIsLoading] = useState<boolean>(false);
   const [query, setQuery] = useState("");
+  const [submitting, setSubmitting] = useState<boolean>(false);
+
+  const canCreateLabel = allowPermissions([EUserPermissions.ADMIN], EUserPermissionsLevel.PROJECT);
 
   const projectLabels = getProjectLabels(projectId);
 
@@ -83,11 +90,25 @@ export const IssueLabelSelect: React.FC<IIssueLabelSelect> = observer((props) =>
     </div>
   );
 
-  const searchInputKeyDown = (e: React.KeyboardEvent<HTMLInputElement>) => {
+  const searchInputKeyDown = async (e: React.KeyboardEvent<HTMLInputElement>) => {
     if (query !== "" && e.key === "Escape") {
       e.stopPropagation();
       setQuery("");
     }
+
+    if (query !== "" && e.key === "Enter") {
+      e.stopPropagation();
+      e.preventDefault();
+      await handleAddLabel(query);
+    }
+  };
+
+  const handleAddLabel = async (labelName: string) => {
+    setSubmitting(true);
+    const label = await onAddLabel(workspaceSlug, projectId, { name: labelName, color: getRandomLabelColor() });
+    onSelect([...values, label.id]);
+    setQuery("");
+    setSubmitting(false);
   };
 
   if (!issueId || !values) return <></>;
@@ -159,10 +180,19 @@ export const IssueLabelSelect: React.FC<IIssueLabelSelect> = observer((props) =>
                     )}
                   </Combobox.Option>
                 ))
+              ) : submitting ? (
+                <Loader className="spin  h-3.5 w-3.5" />
+              ) : canCreateLabel ? (
+                <p
+                  onClick={() => {
+                    handleAddLabel(query);
+                  }}
+                  className="text-left text-custom-text-200 cursor-pointer"
+                >
+                  + Add <span className="text-custom-text-100">&quot;{query}&quot;</span> to labels
+                </p>
               ) : (
-                <span className="flex items-center gap-2 p-1">
-                  <p className="text-left text-custom-text-200 ">No matching results</p>
-                </span>
+                <p className="text-left text-custom-text-200 ">No matching results.</p>
               )}
             </div>
           </div>
diff --git a/web/core/components/issues/issue-detail/label/select/root.tsx b/web/core/components/issues/issue-detail/label/select/root.tsx
index 00f96522b1c..a57a58742c2 100644
--- a/web/core/components/issues/issue-detail/label/select/root.tsx
+++ b/web/core/components/issues/issue-detail/label/select/root.tsx
@@ -26,6 +26,7 @@ export const IssueLabelSelectRoot: FC<TIssueLabelSelectRoot> = (props) => {
       issueId={issueId}
       values={values}
       onSelect={handleLabel}
+      onAddLabel={labelOperations.createLabel}
     />
   );
 };
diff --git a/web/core/components/issues/issue-layouts/kanban/block.tsx b/web/core/components/issues/issue-layouts/kanban/block.tsx
index d8f4307e855..5fbee1c0a73 100644
--- a/web/core/components/issues/issue-layouts/kanban/block.tsx
+++ b/web/core/components/issues/issue-layouts/kanban/block.tsx
@@ -6,6 +6,7 @@ import { draggable, dropTargetForElements } from "@atlaskit/pragmatic-drag-and-d
 import { observer } from "mobx-react";
 import { useParams } from "next/navigation";
 // plane helpers
+import { EIssueServiceType } from "@plane/constants";
 import { useOutsideClickDetector } from "@plane/hooks";
 // types
 import { TIssue, IIssueDisplayProperties, IIssueMap } from "@plane/types";
@@ -26,7 +27,6 @@ import { IssueIdentifier } from "@/plane-web/components/issues";
 import { TRenderQuickActions } from "../list/list-view-types";
 import { IssueProperties } from "../properties/all-properties";
 import { getIssueBlockId } from "../utils";
-import { EIssueServiceType } from "@plane/constants";
 
 interface IssueBlockProps {
   issueId: string;
diff --git a/web/core/components/issues/issue-layouts/properties/labels.tsx b/web/core/components/issues/issue-layouts/properties/labels.tsx
index 823137cb88f..56f9b651bef 100644
--- a/web/core/components/issues/issue-layouts/properties/labels.tsx
+++ b/web/core/components/issues/issue-layouts/properties/labels.tsx
@@ -1,11 +1,11 @@
 "use client";
 
-import { Fragment, useEffect, useRef, useState } from "react";
+import { useEffect, useRef, useState } from "react";
 import { Placement } from "@popperjs/core";
 import { observer } from "mobx-react";
 import { useParams } from "next/navigation";
 import { usePopper } from "react-popper";
-import { Check, ChevronDown, Search, Tags } from "lucide-react";
+import { Check, ChevronDown, Loader, Search, Tags } from "lucide-react";
 import { Combobox } from "@headlessui/react";
 // plane helpers
 import { useOutsideClickDetector } from "@plane/hooks";
@@ -14,9 +14,12 @@ import { IIssueLabel } from "@plane/types";
 // ui
 import { ComboDropDown, Tooltip } from "@plane/ui";
 // hooks
-import { useLabel } from "@/hooks/store";
+import { getRandomLabelColor } from "@/constants/label";
+import { useLabel, useUserPermissions } from "@/hooks/store";
 import { useDropdownKeyDown } from "@/hooks/use-dropdown-key-down";
 import { usePlatformOS } from "@/hooks/use-platform-os";
+import { EUserPermissions, EUserPermissionsLevel } from "ee/constants/user-permissions";
+// constants
 
 export interface IIssuePropertyLabels {
   projectId: string | null;
@@ -62,6 +65,7 @@ export const IssuePropertyLabels: React.FC<IIssuePropertyLabels> = observer((pro
   // states
   const [query, setQuery] = useState("");
   const [isOpen, setIsOpen] = useState(false);
+  const [submitting, setSubmitting] = useState<boolean>(false);
   // refs
   const dropdownRef = useRef<HTMLDivElement | null>(null);
   const inputRef = useRef<HTMLInputElement | null>(null);
@@ -70,9 +74,12 @@ export const IssuePropertyLabels: React.FC<IIssuePropertyLabels> = observer((pro
   const [popperElement, setPopperElement] = useState<HTMLDivElement | null>(null);
   const [isLoading, setIsLoading] = useState<boolean>(false);
   // store hooks
-  const { fetchProjectLabels, getProjectLabels } = useLabel();
+  const { fetchProjectLabels, getProjectLabels, createLabel } = useLabel();
   const { isMobile } = usePlatformOS();
   const storeLabels = getProjectLabels(projectId);
+  const { allowPermissions } = useUserPermissions();
+
+  const canCreateLabel = allowPermissions([EUserPermissions.ADMIN], EUserPermissionsLevel.PROJECT);
 
   const onOpen = () => {
     if (!storeLabels && workspaceSlug && projectId)
@@ -102,11 +109,17 @@ export const IssuePropertyLabels: React.FC<IIssuePropertyLabels> = observer((pro
 
   useOutsideClickDetector(dropdownRef, handleClose);
 
-  const searchInputKeyDown = (e: React.KeyboardEvent<HTMLInputElement>) => {
+  const searchInputKeyDown = async (e: React.KeyboardEvent<HTMLInputElement>) => {
     if (query !== "" && e.key === "Escape") {
       e.stopPropagation();
       setQuery("");
     }
+
+    if (query !== "" && e.key === "Enter") {
+      e.stopPropagation();
+      e.preventDefault();
+      await handleAddLabel(query);
+    }
   };
 
   useEffect(() => {
@@ -249,6 +262,15 @@ export const IssuePropertyLabels: React.FC<IIssuePropertyLabels> = observer((pro
     </button>
   );
 
+  const handleAddLabel = async (labelName: string) => {
+    if (!projectId) return;
+    setSubmitting(true);
+    const label = await createLabel(workspaceSlug, projectId, { name: labelName, color: getRandomLabelColor() });
+    onChange([...value, label.id]);
+    setQuery("");
+    setSubmitting(false);
+  };
+
   return (
     <ComboDropDown
       as="div"
@@ -314,10 +336,19 @@ export const IssuePropertyLabels: React.FC<IIssuePropertyLabels> = observer((pro
                     )}
                   </Combobox.Option>
                 ))
+              ) : submitting ? (
+                <Loader className="spin  h-3.5 w-3.5" />
+              ) : canCreateLabel ? (
+                <p
+                  onClick={() => {
+                    handleAddLabel(query);
+                  }}
+                  className="text-left text-custom-text-200 cursor-pointer"
+                >
+                  + Add <span className="text-custom-text-100">&quot;{query}&quot;</span> to labels
+                </p>
               ) : (
-                <span className="flex items-center gap-2 p-1">
-                  <p className="text-left text-custom-text-200 ">No matching results</p>
-                </span>
+                <p className="text-left text-custom-text-200 ">No matching results.</p>
               )}
             </div>
           </div>