diff --git a/webui/src/components/Label.tsx b/webui/src/components/Label.tsx
index 111f6d7ff2b46ab09a20c7430ec41bdc47452b0c..13c913c92fcd633f45505e3b0f35761e9de4c2db 100644
--- a/webui/src/components/Label.tsx
+++ b/webui/src/components/Label.tsx
@@ -1,56 +1,43 @@
 import React from 'react';
 
+import { Chip } from '@material-ui/core';
 import { common } from '@material-ui/core/colors';
-import { makeStyles } from '@material-ui/core/styles';
 import {
-  getContrastRatio,
   darken,
+  getContrastRatio,
 } from '@material-ui/core/styles/colorManipulator';
 
-import { LabelFragment } from '../graphql/fragments.generated';
-import { Color } from 'src/gqlTypes';
+import { Color } from '../gqlTypes';
+
+import { LabelFragment } from './fragments.generated';
+
+const _rgb = (color: Color) =>
+  'rgb(' + color.R + ',' + color.G + ',' + color.B + ')';
 
 // Minimum contrast between the background and the text color
 const contrastThreshold = 2.5;
-
 // Guess the text color based on the background color
 const getTextColor = (background: string) =>
   getContrastRatio(background, common.white) >= contrastThreshold
     ? common.white // White on dark backgrounds
     : common.black; // And black on light ones
 
-const _rgb = (color: Color) =>
-  'rgb(' + color.R + ',' + color.G + ',' + color.B + ')';
-
 // Create a style object from the label RGB colors
 const createStyle = (color: Color) => ({
   backgroundColor: _rgb(color),
   color: getTextColor(_rgb(color)),
   borderBottomColor: darken(_rgb(color), 0.2),
+  margin: '3px',
 });
 
-const useStyles = makeStyles((theme) => ({
-  label: {
-    ...theme.typography.body1,
-    padding: '1px 6px 0.5px',
-    fontSize: '0.9em',
-    fontWeight: 500,
-    margin: '0.05em 1px calc(-1.5px + 0.05em)',
-    borderRadius: '3px',
-    display: 'inline-block',
-    borderBottom: 'solid 1.5px',
-    verticalAlign: 'bottom',
-  },
-}));
-
 type Props = { label: LabelFragment };
 function Label({ label }: Props) {
-  const classes = useStyles();
   return (
-    <span className={classes.label} style={createStyle(label.color)}>
-      {label.name}
-    </span>
+    <Chip
+      size={'small'}
+      label={label.name}
+      style={createStyle(label.color)}
+    ></Chip>
   );
 }
-
 export default Label;
diff --git a/webui/src/pages/bug/Bug.tsx b/webui/src/pages/bug/Bug.tsx
index 25281f963082de500ba3610ec8793bc9bc56e2f6..3cb48ecde214cd24675ebb7d73bc9106e3a19e29 100644
--- a/webui/src/pages/bug/Bug.tsx
+++ b/webui/src/pages/bug/Bug.tsx
@@ -9,6 +9,7 @@ import Label from 'src/components/Label';
 import { BugFragment } from './Bug.generated';
 import CommentForm from './CommentForm';
 import TimelineQuery from './TimelineQuery';
+import LabelMenu from './labels/LabelMenu';
 
 /**
  * Css in JS Styles
@@ -53,13 +54,13 @@ const useStyles = makeStyles((theme) => ({
     listStyle: 'none',
     padding: 0,
     margin: 0,
+    display: 'flex',
+    flexDirection: 'row',
+    flexWrap: 'wrap',
   },
   label: {
-    marginTop: theme.spacing(1),
-    marginBottom: theme.spacing(1),
-    '& > *': {
-      display: 'block',
-    },
+    marginTop: theme.spacing(0.1),
+    marginBottom: theme.spacing(0.1),
   },
   noLabel: {
     ...theme.typography.body2,
@@ -94,7 +95,9 @@ function Bug({ bug }: Props) {
           </IfLoggedIn>
         </div>
         <div className={classes.rightSidebar}>
-          <span className={classes.rightSidebarTitle}>Labels</span>
+          <span className={classes.rightSidebarTitle}>
+            <LabelMenu bug={bug} />
+          </span>
           <ul className={classes.labelList}>
             {bug.labels.length === 0 && (
               <span className={classes.noLabel}>None yet</span>
diff --git a/webui/src/pages/bug/labels/LabelMenu.tsx b/webui/src/pages/bug/labels/LabelMenu.tsx
new file mode 100644
index 0000000000000000000000000000000000000000..8213d15b8d6399af06728616eedbfb0558bdad47
--- /dev/null
+++ b/webui/src/pages/bug/labels/LabelMenu.tsx
@@ -0,0 +1,356 @@
+import React, { useEffect, useRef, useState } from 'react';
+
+import { IconButton } from '@material-ui/core';
+import Menu from '@material-ui/core/Menu';
+import MenuItem from '@material-ui/core/MenuItem';
+import { SvgIconProps } from '@material-ui/core/SvgIcon';
+import TextField from '@material-ui/core/TextField';
+import { makeStyles, withStyles } from '@material-ui/core/styles';
+import { darken } from '@material-ui/core/styles/colorManipulator';
+import CheckIcon from '@material-ui/icons/Check';
+import SettingsIcon from '@material-ui/icons/Settings';
+
+import { Color } from '../../../gqlTypes';
+import {
+  ListLabelsDocument,
+  useListLabelsQuery,
+} from '../../list/ListLabels.generated';
+import { BugFragment } from '../Bug.generated';
+import { GetBugDocument } from '../BugQuery.generated';
+
+import { useSetLabelMutation } from './SetLabel.generated';
+
+type DropdownTuple = [string, string, Color];
+
+type FilterDropdownProps = {
+  children: React.ReactNode;
+  dropdown: DropdownTuple[];
+  icon?: React.ComponentType<SvgIconProps>;
+  hasFilter?: boolean;
+  itemActive: (key: string) => boolean;
+  onClose: () => void;
+  toggleLabel: (key: string, active: boolean) => void;
+  onNewItem: (name: string) => void;
+} & React.ButtonHTMLAttributes<HTMLButtonElement>;
+
+const CustomTextField = withStyles((theme) => ({
+  root: {
+    margin: '0 8px 12px 8px',
+    '& label.Mui-focused': {
+      margin: '0 2px',
+      color: theme.palette.text.secondary,
+    },
+    '& .MuiInput-underline::before': {
+      borderBottomColor: theme.palette.divider,
+    },
+    '& .MuiInput-underline::after': {
+      borderBottomColor: theme.palette.divider,
+    },
+  },
+}))(TextField);
+
+const ITEM_HEIGHT = 48;
+
+const useStyles = makeStyles((theme) => ({
+  element: {
+    ...theme.typography.body2,
+    color: theme.palette.text.secondary,
+    padding: theme.spacing(0, 1),
+    fontWeight: 400,
+    textDecoration: 'none',
+    display: 'flex',
+    background: 'none',
+    border: 'none',
+  },
+  itemActive: {
+    fontWeight: 600,
+    color: theme.palette.text.primary,
+  },
+  icon: {
+    paddingRight: theme.spacing(0.5),
+  },
+  labelcolor: {
+    width: '15px',
+    height: '15px',
+    display: 'flex',
+    backgroundColor: 'blue',
+    borderRadius: '0.25rem',
+    marginRight: '5px',
+    marginLeft: '3px',
+  },
+  labelsheader: {
+    display: 'flex',
+    flexDirection: 'row',
+  },
+  menuRow: {
+    display: 'flex',
+    flexDirection: 'row',
+    alignItems: 'center',
+    flexWrap: 'wrap',
+  },
+}));
+
+const _rgb = (color: Color) =>
+  'rgb(' + color.R + ',' + color.G + ',' + color.B + ')';
+
+// Create a style object from the label RGB colors
+const createStyle = (color: Color) => ({
+  backgroundColor: _rgb(color),
+  borderBottomColor: darken(_rgb(color), 0.2),
+});
+
+function FilterDropdown({
+  children,
+  dropdown,
+  icon: Icon,
+  hasFilter,
+  itemActive,
+  onClose,
+  toggleLabel,
+  onNewItem,
+}: FilterDropdownProps) {
+  const [open, setOpen] = useState(false);
+  const [filter, setFilter] = useState<string>('');
+  const buttonRef = useRef<HTMLButtonElement>(null);
+  const searchRef = useRef<HTMLButtonElement>(null);
+  const classes = useStyles({ active: false });
+
+  useEffect(() => {
+    searchRef && searchRef.current && searchRef.current.focus();
+  }, [filter]);
+
+  return (
+    <>
+      <div className={classes.labelsheader}>
+        Labels
+        <IconButton
+          ref={buttonRef}
+          onClick={() => setOpen(!open)}
+          className={classes.element}
+        >
+          <SettingsIcon fontSize={'small'} />
+        </IconButton>
+      </div>
+
+      <Menu
+        getContentAnchorEl={null}
+        ref={searchRef}
+        anchorOrigin={{
+          vertical: 'bottom',
+          horizontal: 'left',
+        }}
+        transformOrigin={{
+          vertical: 'top',
+          horizontal: 'left',
+        }}
+        open={open}
+        onClose={() => {
+          setOpen(false);
+          onClose();
+        }}
+        onExited={() => setFilter('')}
+        anchorEl={buttonRef.current}
+        PaperProps={{
+          style: {
+            maxHeight: ITEM_HEIGHT * 4.5,
+            width: '25ch',
+          },
+        }}
+      >
+        {hasFilter && (
+          <CustomTextField
+            onChange={(e) => {
+              const { value } = e.target;
+              setFilter(value);
+            }}
+            onKeyDown={(e) => e.stopPropagation()}
+            value={filter}
+            label={`Filter ${children}`}
+          />
+        )}
+        {dropdown
+          .sort(function (x, y) {
+            // true values first
+            return itemActive(x[1]) === itemActive(y[1]) ? 0 : x ? -1 : 1;
+          })
+          .filter((d) => d[1].toLowerCase().includes(filter.toLowerCase()))
+          .map(([key, value, color]) => (
+            <MenuItem
+              style={{ whiteSpace: 'normal', wordBreak: 'break-all' }}
+              onClick={() => {
+                toggleLabel(key, itemActive(key));
+              }}
+              key={key}
+              className={itemActive(key) ? classes.itemActive : undefined}
+            >
+              <div className={classes.menuRow}>
+                {itemActive(key) ? <CheckIcon fontSize={'small'} /> : null}
+                <div
+                  className={classes.labelcolor}
+                  style={createStyle(color)}
+                />
+                {value}
+              </div>
+            </MenuItem>
+          ))}
+        {filter !== '' &&
+          dropdown.filter((d) => d[1].toLowerCase() === filter.toLowerCase())
+            .length <= 0 && (
+            <MenuItem
+              style={{ whiteSpace: 'normal', wordBreak: 'break-all' }}
+              onClick={() => {
+                onNewItem(filter);
+                setFilter('');
+                setOpen(false);
+              }}
+            >
+              Create new label '{filter}'
+            </MenuItem>
+          )}
+      </Menu>
+    </>
+  );
+}
+
+type Props = {
+  bug: BugFragment;
+};
+function LabelMenu({ bug }: Props) {
+  const { data: labelsData } = useListLabelsQuery();
+  const [bugLabelNames, setBugLabelNames] = useState(
+    bug.labels.map((l) => l.name)
+  );
+  const [selectedLabels, setSelectedLabels] = useState(
+    bug.labels.map((l) => l.name)
+  );
+
+  const [setLabelMutation] = useSetLabelMutation();
+
+  useEffect(() => {});
+  function toggleLabel(key: string, active: boolean) {
+    const labels: string[] = active
+      ? selectedLabels.filter((label) => label !== key)
+      : selectedLabels.concat([key]);
+    setSelectedLabels(labels);
+    console.log('toggle (selected)');
+    console.log(labels);
+  }
+
+  function diff(oldState: string[], newState: string[]) {
+    console.log('oldState / Buglabels');
+    console.log(oldState);
+    console.log('newState / Selected');
+    console.log(newState);
+    const added = newState.filter((x) => !oldState.includes(x));
+    const removed = oldState.filter((x) => !newState.includes(x));
+    return {
+      added: added,
+      removed: removed,
+    };
+  }
+
+  const changeBugLabels = (
+    bugLabels = bug.labels.map((l) => l.name),
+    selectedLabel = selectedLabels
+  ) => {
+    const labels = diff(bugLabels, selectedLabel);
+    console.log('changeBugLabels');
+    console.log(labels);
+    console.log('bugLabelNames');
+    console.log(bugLabelNames);
+    if (labels.added.length > 0 || labels.removed.length > 0) {
+      setLabelMutation({
+        variables: {
+          input: {
+            prefix: bug.id,
+            added: labels.added,
+            Removed: labels.removed,
+          },
+        },
+        refetchQueries: [
+          // TODO: update the cache instead of refetching
+          {
+            query: GetBugDocument,
+            variables: { id: bug.id },
+          },
+          {
+            query: ListLabelsDocument,
+          },
+        ],
+        awaitRefetchQueries: true,
+      })
+        .then((res) => {
+          console.log(res);
+          setBugLabelNames(selectedLabels);
+        })
+        .catch((e) => console.log(e));
+    }
+  };
+
+  function isActive(key: string) {
+    return selectedLabels.includes(key);
+  }
+
+  function createNewLabel(name: string) {
+    console.log('CREATE NEW LABEL');
+    setLabelMutation({
+      variables: {
+        input: {
+          prefix: bug.id,
+          added: [name],
+        },
+      },
+      refetchQueries: [
+        // TODO: update the cache instead of refetching
+        {
+          query: GetBugDocument,
+          variables: { id: bug.id },
+        },
+        {
+          query: ListLabelsDocument,
+        },
+      ],
+      awaitRefetchQueries: true,
+    })
+      .then((res) => {
+        console.log(res);
+
+        const tmp = selectedLabels.concat([name]);
+        console.log(tmp);
+        console.log('tmp');
+        setSelectedLabels(tmp);
+        setBugLabelNames(bugLabelNames.concat([name]));
+
+        changeBugLabels(bugLabelNames.concat([name]), tmp);
+      })
+      .catch((e) => console.log('createnewLabelError' + e));
+  }
+
+  let labels: any = [];
+  if (
+    labelsData?.repository &&
+    labelsData.repository.validLabels &&
+    labelsData.repository.validLabels.nodes
+  ) {
+    labels = labelsData.repository.validLabels.nodes.map((node) => [
+      node.name,
+      node.name,
+      node.color,
+    ]);
+  }
+
+  return (
+    <FilterDropdown
+      onClose={changeBugLabels}
+      itemActive={isActive}
+      toggleLabel={toggleLabel}
+      dropdown={labels}
+      onNewItem={createNewLabel}
+      hasFilter
+    >
+      Labels
+    </FilterDropdown>
+  );
+}
+
+export default LabelMenu;
diff --git a/webui/src/pages/bug/labels/SetLabel.graphql b/webui/src/pages/bug/labels/SetLabel.graphql
new file mode 100644
index 0000000000000000000000000000000000000000..44dfae11d963486496af6e538e92910a28442a5a
--- /dev/null
+++ b/webui/src/pages/bug/labels/SetLabel.graphql
@@ -0,0 +1,13 @@
+mutation SetLabel($input: ChangeLabelInput) {
+    changeLabels(input: $input) {
+        results{
+            status,
+            label{
+                name,
+                color{R},
+                color{G},
+                color{B}
+            }
+        }
+    }
+}
diff --git a/webui/src/pages/list/BugRow.tsx b/webui/src/pages/list/BugRow.tsx
index 1f5d22aae2626eea582b8b311a59d4b374959c0b..190370b0872f79fe52c8f17b0f6ab43463282cb3 100644
--- a/webui/src/pages/list/BugRow.tsx
+++ b/webui/src/pages/list/BugRow.tsx
@@ -71,9 +71,6 @@ const useStyles = makeStyles((theme) => ({
   },
   labels: {
     paddingLeft: theme.spacing(1),
-    '& > *': {
-      display: 'inline-block',
-    },
   },
   commentCount: {
     fontSize: '1rem',
diff --git a/webui/src/pages/list/Filter.tsx b/webui/src/pages/list/Filter.tsx
index 2e99eedf08dcfa78f3151e5d6cb2f57eaea17f49..119480e77b77358269cf8c78ad5a32eb5f7a826f 100644
--- a/webui/src/pages/list/Filter.tsx
+++ b/webui/src/pages/list/Filter.tsx
@@ -8,8 +8,11 @@ import MenuItem from '@material-ui/core/MenuItem';
 import { SvgIconProps } from '@material-ui/core/SvgIcon';
 import TextField from '@material-ui/core/TextField';
 import { makeStyles, withStyles } from '@material-ui/core/styles';
+import { darken } from '@material-ui/core/styles/colorManipulator';
 import ArrowDropDown from '@material-ui/icons/ArrowDropDown';
 
+import { Color } from '../../gqlTypes';
+
 const CustomTextField = withStyles((theme) => ({
   root: {
     margin: '0 8px 12px 8px',
@@ -99,9 +102,26 @@ const useStyles = makeStyles((theme) => ({
   icon: {
     paddingRight: theme.spacing(0.5),
   },
+  labelcolor: {
+    minWidth: '15px',
+    minHeight: '15px',
+    display: 'flex',
+    backgroundColor: 'blue',
+    borderRadius: '0.25rem',
+    marginRight: '5px',
+    marginLeft: '3px',
+  },
 }));
+const _rgb = (color: Color) =>
+  'rgb(' + color.R + ',' + color.G + ',' + color.B + ')';
+
+// Create a style object from the label RGB colors
+const createStyle = (color: Color) => ({
+  backgroundColor: _rgb(color),
+  borderBottomColor: darken(_rgb(color), 0.2),
+});
 
-type DropdownTuple = [string, string];
+type DropdownTuple = [string, string, Color?];
 
 type FilterDropdownProps = {
   children: React.ReactNode;
@@ -183,14 +203,21 @@ function FilterDropdown({
         )}
         {dropdown
           .filter((d) => d[1].toLowerCase().includes(filter.toLowerCase()))
-          .map(([key, value]) => (
+          .map(([key, value, color]) => (
             <MenuItem
+              style={{ whiteSpace: 'normal', wordBreak: 'break-all' }}
               component={Link}
               to={to(key)}
               className={itemActive(key) ? classes.itemActive : undefined}
               onClick={() => setOpen(false)}
               key={key}
             >
+              {color && (
+                <div
+                  className={classes.labelcolor}
+                  style={createStyle(color)}
+                />
+              )}
               {value}
             </MenuItem>
           ))}
diff --git a/webui/src/pages/list/FilterToolbar.tsx b/webui/src/pages/list/FilterToolbar.tsx
index 979bf5309ab85822d16d5be9ddbfbc7fd7ad66c4..e109578db87b27c88869cc05dbd0efb96349bd99 100644
--- a/webui/src/pages/list/FilterToolbar.tsx
+++ b/webui/src/pages/list/FilterToolbar.tsx
@@ -89,6 +89,7 @@ function FilterToolbar({ query, queryLocation }: Props) {
     labels = labelsData.repository.validLabels.nodes.map((node) => [
       node.name,
       node.name,
+      node.color,
     ]);
   }
 
diff --git a/webui/src/pages/list/ListLabels.graphql b/webui/src/pages/list/ListLabels.graphql
index dcb44b67279e531492be110f9e9ac85f50b251f1..8b2f561a60626605dbc26a8a142fb91529e8af06 100644
--- a/webui/src/pages/list/ListLabels.graphql
+++ b/webui/src/pages/list/ListLabels.graphql
@@ -2,7 +2,8 @@ query ListLabels {
     repository {
         validLabels {
             nodes {
-                name
+                name,
+                color{R,G,B}
             }
         }
     }