diff --git a/apps/app/components/labels/create-label-modal.tsx b/apps/app/components/labels/create-label-modal.tsx
index 7af86888d..190b9e832 100644
--- a/apps/app/components/labels/create-label-modal.tsx
+++ b/apps/app/components/labels/create-label-modal.tsx
@@ -20,6 +20,7 @@ import { ChevronDownIcon } from "@heroicons/react/24/outline";
 import type { ICurrentUserResponse, IIssueLabels, IState } from "types";
 // constants
 import { PROJECT_ISSUE_LABELS } from "constants/fetch-keys";
+import { LABEL_COLOR_OPTIONS, getRandomLabelColor } from "constants/label";
 
 // types
 type Props = {
@@ -52,10 +53,15 @@ export const CreateLabelModal: React.FC<Props> = ({
     watch,
     control,
     reset,
+    setValue,
   } = useForm<IIssueLabels>({
     defaultValues,
   });
 
+  useEffect(() => {
+    if (isOpen) setValue("color", getRandomLabelColor());
+  }, [setValue, isOpen]);
+
   const onClose = () => {
     handleClose();
     reset(defaultValues);
@@ -156,6 +162,7 @@ export const CreateLabelModal: React.FC<Props> = ({
                                   render={({ field: { value, onChange } }) => (
                                     <TwitterPicker
                                       color={value}
+                                      colors={LABEL_COLOR_OPTIONS}
                                       onChange={(value) => {
                                         onChange(value.hex);
                                         close();
diff --git a/apps/app/components/labels/create-update-label-inline.tsx b/apps/app/components/labels/create-update-label-inline.tsx
index ca4fdf3dc..6306d14ca 100644
--- a/apps/app/components/labels/create-update-label-inline.tsx
+++ b/apps/app/components/labels/create-update-label-inline.tsx
@@ -22,12 +22,14 @@ import { ChevronDownIcon } from "@heroicons/react/24/outline";
 import { IIssueLabels } from "types";
 // fetch-keys
 import { PROJECT_ISSUE_LABELS } from "constants/fetch-keys";
+import { getRandomLabelColor, LABEL_COLOR_OPTIONS } from "constants/label";
 
 type Props = {
   labelForm: boolean;
   setLabelForm: React.Dispatch<React.SetStateAction<boolean>>;
   isUpdating: boolean;
   labelToUpdate: IIssueLabels | null;
+  onClose?: () => void;
 };
 
 const defaultValues: Partial<IIssueLabels> = {
@@ -35,167 +37,180 @@ const defaultValues: Partial<IIssueLabels> = {
   color: "rgb(var(--color-text-200))",
 };
 
-type Ref = HTMLDivElement;
+export const CreateUpdateLabelInline = forwardRef<HTMLDivElement, Props>(
+  function CreateUpdateLabelInline(props, ref) {
+    const { labelForm, setLabelForm, isUpdating, labelToUpdate, onClose } = props;
 
-export const CreateUpdateLabelInline = forwardRef<Ref, Props>(function CreateUpdateLabelInline(
-  { labelForm, setLabelForm, isUpdating, labelToUpdate },
-  ref
-) {
-  const router = useRouter();
-  const { workspaceSlug, projectId } = router.query;
+    const router = useRouter();
+    const { workspaceSlug, projectId } = router.query;
 
-  const { user } = useUserAuth();
+    const { user } = useUserAuth();
 
-  const {
-    handleSubmit,
-    control,
-    register,
-    reset,
-    formState: { errors, isSubmitting },
-    watch,
-    setValue,
-  } = useForm<IIssueLabels>({
-    defaultValues,
-  });
+    const {
+      handleSubmit,
+      control,
+      register,
+      reset,
+      formState: { errors, isSubmitting },
+      watch,
+      setValue,
+    } = useForm<IIssueLabels>({
+      defaultValues,
+    });
 
-  const handleLabelCreate: SubmitHandler<IIssueLabels> = async (formData) => {
-    if (!workspaceSlug || !projectId || isSubmitting) return;
+    const handleClose = () => {
+      setLabelForm(false);
+      reset(defaultValues);
+      if (onClose) onClose();
+    };
 
-    await issuesService
-      .createIssueLabel(workspaceSlug as string, projectId as string, formData, user)
-      .then((res) => {
-        mutate<IIssueLabels[]>(
-          PROJECT_ISSUE_LABELS(projectId as string),
-          (prevData) => [res, ...(prevData ?? [])],
-          false
+    const handleLabelCreate: SubmitHandler<IIssueLabels> = async (formData) => {
+      if (!workspaceSlug || !projectId || isSubmitting) return;
+
+      await issuesService
+        .createIssueLabel(workspaceSlug as string, projectId as string, formData, user)
+        .then((res) => {
+          mutate<IIssueLabels[]>(
+            PROJECT_ISSUE_LABELS(projectId as string),
+            (prevData) => [res, ...(prevData ?? [])],
+            false
+          );
+          handleClose();
+        });
+    };
+
+    const handleLabelUpdate: SubmitHandler<IIssueLabels> = async (formData) => {
+      if (!workspaceSlug || !projectId || isSubmitting) return;
+
+      await issuesService
+        .patchIssueLabel(
+          workspaceSlug as string,
+          projectId as string,
+          labelToUpdate?.id ?? "",
+          formData,
+          user
+        )
+        .then(() => {
+          reset(defaultValues);
+          mutate<IIssueLabels[]>(
+            PROJECT_ISSUE_LABELS(projectId as string),
+            (prevData) =>
+              prevData?.map((p) => (p.id === labelToUpdate?.id ? { ...p, ...formData } : p)),
+            false
+          );
+          handleClose();
+        });
+    };
+
+    useEffect(() => {
+      if (!labelForm && isUpdating) return;
+
+      reset();
+    }, [labelForm, isUpdating, reset]);
+
+    useEffect(() => {
+      if (!labelToUpdate) return;
+
+      setValue(
+        "color",
+        labelToUpdate.color && labelToUpdate.color !== "" ? labelToUpdate.color : "#000"
+      );
+      setValue("name", labelToUpdate.name);
+    }, [labelToUpdate, setValue]);
+
+    useEffect(() => {
+      if (labelToUpdate) {
+        setValue(
+          "color",
+          labelToUpdate.color && labelToUpdate.color !== "" ? labelToUpdate.color : "#000"
         );
-        reset(defaultValues);
-        setLabelForm(false);
-      });
-  };
+        return;
+      }
 
-  const handleLabelUpdate: SubmitHandler<IIssueLabels> = async (formData) => {
-    if (!workspaceSlug || !projectId || isSubmitting) return;
+      setValue("color", getRandomLabelColor());
+    }, [labelToUpdate, setValue]);
 
-    await issuesService
-      .patchIssueLabel(
-        workspaceSlug as string,
-        projectId as string,
-        labelToUpdate?.id ?? "",
-        formData,
-        user
-      )
-      .then(() => {
-        reset(defaultValues);
-        mutate<IIssueLabels[]>(
-          PROJECT_ISSUE_LABELS(projectId as string),
-          (prevData) =>
-            prevData?.map((p) => (p.id === labelToUpdate?.id ? { ...p, ...formData } : p)),
-          false
-        );
-        setLabelForm(false);
-      });
-  };
-
-  useEffect(() => {
-    if (!labelForm && isUpdating) return;
-
-    reset();
-  }, [labelForm, isUpdating, reset]);
-
-  useEffect(() => {
-    if (!labelToUpdate) return;
-
-    setValue(
-      "color",
-      labelToUpdate.color && labelToUpdate.color !== "" ? labelToUpdate.color : "#000"
-    );
-    setValue("name", labelToUpdate.name);
-  }, [labelToUpdate, setValue]);
-
-  return (
-    <div
-      className={`flex scroll-m-8 items-center gap-2 rounded-[10px] border border-custom-border-200 bg-custom-background-100 p-5 ${
-        labelForm ? "" : "hidden"
-      }`}
-      ref={ref}
-    >
-      <div className="flex-shrink-0">
-        <Popover className="relative z-10 flex h-full w-full items-center justify-center">
-          {({ open }) => (
-            <>
-              <Popover.Button
-                className={`group inline-flex items-center text-base font-medium focus:outline-none ${
-                  open ? "text-custom-text-100" : "text-custom-text-200"
-                }`}
-              >
-                <span
-                  className="h-5 w-5 rounded"
-                  style={{
-                    backgroundColor: watch("color"),
-                  }}
-                />
-                <ChevronDownIcon
-                  className={`ml-2 h-5 w-5 group-hover:text-custom-text-200 ${
-                    open ? "text-gray-600" : "text-gray-400"
-                  }`}
-                  aria-hidden="true"
-                />
-              </Popover.Button>
-
-              <Transition
-                as={React.Fragment}
-                enter="transition ease-out duration-200"
-                enterFrom="opacity-0 translate-y-1"
-                enterTo="opacity-100 translate-y-0"
-                leave="transition ease-in duration-150"
-                leaveFrom="opacity-100 translate-y-0"
-                leaveTo="opacity-0 translate-y-1"
-              >
-                <Popover.Panel className="absolute top-full left-0 z-20 mt-3 w-screen max-w-xs px-2 sm:px-0">
-                  <Controller
-                    name="color"
-                    control={control}
-                    render={({ field: { value, onChange } }) => (
-                      <TwitterPicker color={value} onChange={(value) => onChange(value.hex)} />
-                    )}
-                  />
-                </Popover.Panel>
-              </Transition>
-            </>
-          )}
-        </Popover>
-      </div>
-      <div className="flex flex-1 flex-col justify-center">
-        <Input
-          type="text"
-          id="labelName"
-          name="name"
-          register={register}
-          placeholder="Label title"
-          validations={{
-            required: "Label title is required",
-          }}
-          error={errors.name}
-        />
-      </div>
-      <SecondaryButton
-        onClick={() => {
-          reset();
-          setLabelForm(false);
-        }}
+    return (
+      <div
+        className={`flex scroll-m-8 items-center gap-2 rounded-[10px] border border-custom-border-200 bg-custom-background-100 p-5 ${
+          labelForm ? "" : "hidden"
+        }`}
+        ref={ref}
       >
-        Cancel
-      </SecondaryButton>
-      {isUpdating ? (
-        <PrimaryButton onClick={handleSubmit(handleLabelUpdate)} loading={isSubmitting}>
-          {isSubmitting ? "Updating" : "Update"}
-        </PrimaryButton>
-      ) : (
-        <PrimaryButton onClick={handleSubmit(handleLabelCreate)} loading={isSubmitting}>
-          {isSubmitting ? "Adding" : "Add"}
-        </PrimaryButton>
-      )}
-    </div>
-  );
-});
+        <div className="flex-shrink-0">
+          <Popover className="relative z-10 flex h-full w-full items-center justify-center">
+            {({ open }) => (
+              <>
+                <Popover.Button
+                  className={`group inline-flex items-center text-base font-medium focus:outline-none ${
+                    open ? "text-custom-text-100" : "text-custom-text-200"
+                  }`}
+                >
+                  <span
+                    className="h-5 w-5 rounded"
+                    style={{
+                      backgroundColor: watch("color"),
+                    }}
+                  />
+                  <ChevronDownIcon
+                    className={`ml-2 h-5 w-5 group-hover:text-custom-text-200 ${
+                      open ? "text-gray-600" : "text-gray-400"
+                    }`}
+                    aria-hidden="true"
+                  />
+                </Popover.Button>
+
+                <Transition
+                  as={React.Fragment}
+                  enter="transition ease-out duration-200"
+                  enterFrom="opacity-0 translate-y-1"
+                  enterTo="opacity-100 translate-y-0"
+                  leave="transition ease-in duration-150"
+                  leaveFrom="opacity-100 translate-y-0"
+                  leaveTo="opacity-0 translate-y-1"
+                >
+                  <Popover.Panel className="absolute top-full left-0 z-20 mt-3 w-screen max-w-xs px-2 sm:px-0">
+                    <Controller
+                      name="color"
+                      control={control}
+                      render={({ field: { value, onChange } }) => (
+                        <TwitterPicker
+                          colors={LABEL_COLOR_OPTIONS}
+                          color={value}
+                          onChange={(value) => onChange(value.hex)}
+                        />
+                      )}
+                    />
+                  </Popover.Panel>
+                </Transition>
+              </>
+            )}
+          </Popover>
+        </div>
+        <div className="flex flex-1 flex-col justify-center">
+          <Input
+            type="text"
+            id="labelName"
+            name="name"
+            register={register}
+            placeholder="Label title"
+            validations={{
+              required: "Label title is required",
+            }}
+            error={errors.name}
+          />
+        </div>
+        <SecondaryButton onClick={() => handleClose()}>Cancel</SecondaryButton>
+        {isUpdating ? (
+          <PrimaryButton onClick={handleSubmit(handleLabelUpdate)} loading={isSubmitting}>
+            {isSubmitting ? "Updating" : "Update"}
+          </PrimaryButton>
+        ) : (
+          <PrimaryButton onClick={handleSubmit(handleLabelCreate)} loading={isSubmitting}>
+            {isSubmitting ? "Adding" : "Add"}
+          </PrimaryButton>
+        )}
+      </div>
+    );
+  }
+);
diff --git a/apps/app/constants/label.ts b/apps/app/constants/label.ts
new file mode 100644
index 000000000..220e56209
--- /dev/null
+++ b/apps/app/constants/label.ts
@@ -0,0 +1,17 @@
+export const LABEL_COLOR_OPTIONS = [
+  "#FF6900",
+  "#FCB900",
+  "#7BDCB5",
+  "#00D084",
+  "#8ED1FC",
+  "#0693E3",
+  "#ABB8C3",
+  "#EB144C",
+  "#F78DA7",
+  "#9900EF",
+];
+
+export const getRandomLabelColor = () => {
+  const randomIndex = Math.floor(Math.random() * LABEL_COLOR_OPTIONS.length);
+  return LABEL_COLOR_OPTIONS[randomIndex];
+};
diff --git a/apps/app/pages/[workspaceSlug]/projects/[projectId]/settings/labels.tsx b/apps/app/pages/[workspaceSlug]/projects/[projectId]/settings/labels.tsx
index 3f4495ef5..dc845da68 100644
--- a/apps/app/pages/[workspaceSlug]/projects/[projectId]/settings/labels.tsx
+++ b/apps/app/pages/[workspaceSlug]/projects/[projectId]/settings/labels.tsx
@@ -133,6 +133,11 @@ const LabelsSettings: NextPage = () => {
                   setLabelForm={setLabelForm}
                   isUpdating={isUpdating}
                   labelToUpdate={labelToUpdate}
+                  onClose={() => {
+                    setLabelForm(false);
+                    setIsUpdating(false);
+                    setLabelToUpdate(null);
+                  }}
                   ref={scrollToRef}
                 />
               )}