diff --git a/app/javascript/dashboard/components/ui/Label.vue b/app/javascript/dashboard/components/ui/Label.vue
index 6bbc7e6e8..a6c09e562 100644
--- a/app/javascript/dashboard/components/ui/Label.vue
+++ b/app/javascript/dashboard/components/ui/Label.vue
@@ -89,6 +89,7 @@ export default {
   .label--icon,
   .close--icon {
     font-size: var(--font-size-micro);
+    cursor: pointer;
   }
 
   &.small .label--icon,
diff --git a/app/javascript/dashboard/routes/dashboard/conversation/ContactPanel.vue b/app/javascript/dashboard/routes/dashboard/conversation/ContactPanel.vue
index b89f71137..ef2cd42cd 100644
--- a/app/javascript/dashboard/routes/dashboard/conversation/ContactPanel.vue
+++ b/app/javascript/dashboard/routes/dashboard/conversation/ContactPanel.vue
@@ -53,6 +53,7 @@
         </multiselect>
       </div>
     </div>
+    <conversation-labels :conversation-id="conversationId" />
     <div v-if="browser.browser_name" class="conversation--details">
       <contact-details-item
         v-if="location"
@@ -105,7 +106,6 @@
       v-if="hasContactAttributes"
       :custom-attributes="contact.custom_attributes"
     />
-    <conversation-labels :conversation-id="conversationId" />
     <contact-conversations
       v-if="contact.id"
       :contact-id="contact.id"
@@ -359,7 +359,7 @@ export default {
 }
 
 .conversation--actions {
-  padding: 0 var(--space-normal) var(--space-small);
+  padding: 0 var(--space-normal) var(--space-smaller);
 }
 
 .multiselect__label {
diff --git a/app/javascript/dashboard/routes/dashboard/conversation/labels/LabelBox.vue b/app/javascript/dashboard/routes/dashboard/conversation/labels/LabelBox.vue
index 11beb1c32..a3686fc11 100644
--- a/app/javascript/dashboard/routes/dashboard/conversation/labels/LabelBox.vue
+++ b/app/javascript/dashboard/routes/dashboard/conversation/labels/LabelBox.vue
@@ -8,30 +8,35 @@
         :title="$t('CONTACT_PANEL.LABELS.TITLE')"
         icon="ion-pricetags"
         emoji="🏷️"
-        :show-edit="true"
-        @edit="onEdit"
       />
-      <div class="label-wrap">
+      <div v-on-clickaway="closeDropdownLabel" class="label-wrap">
+        <add-label @add="toggleLabels" />
         <woot-label
           v-for="label in activeLabels"
           :key="label.id"
           :title="label.title"
           :description="label.description"
+          :show-close="true"
           :bg-color="label.color"
+          @click="removeItem"
         />
-        <div v-if="!activeLabels.length" class="no-label-message">
-          <span>{{ $t('CONTACT_PANEL.LABELS.NO_AVAILABLE_LABELS') }}</span>
+
+        <div class="dropdown-wrap">
+          <div
+            :class="{ 'dropdown-pane--open': showSearchDropdownLabel }"
+            class="dropdown-pane"
+          >
+            <label-dropdown
+              v-if="showSearchDropdownLabel"
+              :account-labels="accountLabels"
+              :selected-labels="savedLabels"
+              :conversation-id="conversationId"
+              @add="addItem"
+              @remove="removeItem"
+            />
+          </div>
         </div>
       </div>
-      <add-label-to-conversation
-        v-if="isEditing"
-        :conversation-id="conversationId"
-        :account-labels="accountLabels"
-        :saved-labels="savedLabels"
-        :show.sync="isEditing"
-        :on-close="closeEditModal"
-        :update-labels="onUpdateLabels"
-      />
     </div>
     <spinner v-else></spinner>
   </div>
@@ -39,45 +44,55 @@
 
 <script>
 import { mapGetters } from 'vuex';
-import AddLabelToConversation from './AddLabelToConversation';
 import ContactDetailsItem from '../ContactDetailsItem';
 import Spinner from 'shared/components/Spinner';
+import LabelDropdown from 'shared/components/ui/label/LabelDropdown';
+import AddLabel from 'shared/components/ui/dropdown/AddLabel';
+import { mixin as clickaway } from 'vue-clickaway';
 
 export default {
   components: {
-    AddLabelToConversation,
     ContactDetailsItem,
     Spinner,
+    LabelDropdown,
+    AddLabel,
   },
+
+  mixins: [clickaway],
   props: {
     conversationId: {
       type: [String, Number],
       required: true,
     },
   },
+
   data() {
     return {
-      isEditing: false,
       selectedLabels: [],
+      showSearchDropdownLabel: false,
     };
   },
+
   computed: {
     savedLabels() {
       return this.$store.getters['conversationLabels/getConversationLabels'](
         this.conversationId
       );
     },
+
     ...mapGetters({
       conversationUiFlags: 'contactConversations/getUIFlags',
       labelUiFlags: 'conversationLabels/getUIFlags',
       accountLabels: 'labels/getLabels',
     }),
+
     activeLabels() {
       return this.accountLabels.filter(({ title }) =>
         this.savedLabels.includes(title)
       );
     },
   },
+
   watch: {
     conversationId(newConversationId, prevConversationId) {
       if (newConversationId && newConversationId !== prevConversationId) {
@@ -85,10 +100,12 @@ export default {
       }
     },
   },
+
   mounted() {
     const { conversationId } = this;
     this.fetchLabels(conversationId);
   },
+
   methods: {
     async onUpdateLabels(selectedLabels) {
       try {
@@ -100,13 +117,28 @@ export default {
         // Ignore error
       }
     },
-    onEdit() {
-      this.isEditing = true;
+
+    toggleLabels() {
+      this.showSearchDropdownLabel = !this.showSearchDropdownLabel;
     },
-    closeEditModal() {
-      bus.$emit('fetch_conversation_stats');
-      this.isEditing = false;
+
+    addItem(value) {
+      const result = this.activeLabels.map(item => item.title);
+      result.push(value.title);
+      this.onUpdateLabels(result);
     },
+
+    removeItem(value) {
+      const result = this.activeLabels
+        .map(label => label.title)
+        .filter(label => label !== value);
+      this.onUpdateLabels(result);
+    },
+
+    closeDropdownLabel() {
+      this.showSearchDropdownLabel = false;
+    },
+
     async fetchLabels(conversationId) {
       if (!conversationId) {
         return;
@@ -122,53 +154,38 @@ export default {
 @import '~dashboard/assets/scss/mixins';
 
 .contact-conversation--panel {
-  padding: var(--space-medium) var(--space-slab) var(--space-two);
+  padding: var(--space-micro) var(--space-slab) var(--space-one)
+    var(--space-slab);
 }
 
-.contact-conversation--list .conv-details--item {
-  padding-bottom: 0;
-}
-.conversation--label {
-  color: $color-white;
-  margin-right: $space-small;
-  font-size: $font-size-small;
-  padding: $space-smaller;
-}
-.label-wrap {
-  margin-left: var(--space-medium);
-}
-.no-label-message {
-  color: var(--b-500);
-}
+.contact-conversation--list {
+  width: 100%;
 
-.select-tags {
-  .multiselect {
-    &:hover {
-      cursor: pointer;
+  .label-wrap {
+    margin-left: var(--space-two);
+    position: relative;
+    line-height: var(--space-medium);
+    bottom: var(--space-small);
+
+    .dropdown-wrap {
+      display: flex;
+      position: absolute;
+      margin-right: var(--space-medium);
+      top: var(--space-medium);
+      width: 100%;
+      left: -1px;
+
+      .dropdown-pane {
+        width: 100%;
+        box-sizing: border-box;
+      }
     }
-    transition: $transition-ease-in;
-    margin-bottom: 0;
   }
 }
 
-.button {
-  margin-top: $space-small;
-  margin-left: auto;
-}
-
-.no-results-wrap {
-  padding: 0 $space-small;
-}
-
-.no-results {
-  margin: $space-normal 0 0 0;
-  color: $color-gray;
-  font-weight: $font-weight-normal;
-}
-
 .error {
-  color: $alert-color;
-  font-size: $font-size-mini;
-  font-weight: $font-weight-medium;
+  color: var(--r-500);
+  font-size: var(--font-size-mini);
+  font-weight: var(--font-weight-medium);
 }
 </style>
diff --git a/app/javascript/shared/components/ui/dropdown/AddLabel.vue b/app/javascript/shared/components/ui/dropdown/AddLabel.vue
index 24ac86440..4702e6805 100644
--- a/app/javascript/shared/components/ui/dropdown/AddLabel.vue
+++ b/app/javascript/shared/components/ui/dropdown/AddLabel.vue
@@ -1,15 +1,14 @@
 <template>
-  <div>
-    <woot-button
-      variant="hollow"
-      size="tiny"
-      icon="ion-plus-round"
-      color-scheme="secondary"
-      @click="toggleLabels"
-    >
-      {{ $t('CONTACT_PANEL.LABELS.MODAL.ADD_BUTTON') }}
-    </woot-button>
-  </div>
+  <woot-button
+    variant="hollow"
+    size="tiny"
+    icon="ion-plus-round"
+    color-scheme="secondary"
+    class-names="button-wrap"
+    @click="toggleLabels"
+  >
+    {{ $t('CONTACT_PANEL.LABELS.MODAL.ADD_BUTTON') }}
+  </woot-button>
 </template>
 
 <script>
@@ -22,4 +21,14 @@ export default {
 };
 </script>
 
-<style lang="scss" scoped></style>
+<style lang="scss" scoped>
+.button-wrap {
+  padding: var(--space-micro) var(--space-small);
+  display: inline;
+  line-height: 1.2;
+
+  &::v-deep .icon {
+    font-size: var(--font-size-mini);
+  }
+}
+</style>