diff --git a/app/assets/javascripts/labels_select.js b/app/assets/javascripts/labels_select.js
index ec2fc87bece..4dbc82a73c4 100644
--- a/app/assets/javascripts/labels_select.js
+++ b/app/assets/javascripts/labels_select.js
@@ -336,7 +336,11 @@
                 .removeClass('is-active')
             }
 
-            if ($dropdown.hasClass('js-filter-bulk-update') || $dropdown.hasClass('js-issuable-form-dropdown')) {
+            if ($dropdown.hasClass('js-issuable-form-dropdown')) {
+              return;
+            }
+
+            if ($dropdown.hasClass('js-filter-bulk-update')) {
               _this.enableBulkLabelDropdown();
               _this.setDropdownData($dropdown, isMarking, this.id(label));
               return;
diff --git a/changelogs/unreleased/label-select-toggle.yml b/changelogs/unreleased/label-select-toggle.yml
new file mode 100644
index 00000000000..af5b4246521
--- /dev/null
+++ b/changelogs/unreleased/label-select-toggle.yml
@@ -0,0 +1,4 @@
+---
+title: Fixed label dropdown toggle text not correctly updating
+merge_request:
+author:
diff --git a/spec/features/issues/form_spec.rb b/spec/features/issues/form_spec.rb
index 8771cc8e157..741ca95f1ca 100644
--- a/spec/features/issues/form_spec.rb
+++ b/spec/features/issues/form_spec.rb
@@ -68,6 +68,22 @@ describe 'New/edit issue', feature: true, js: true do
         end
       end
     end
+
+    it 'correctly updates the dropdown toggle when removing a label' do
+      click_button 'Labels'
+
+      page.within '.dropdown-menu-labels' do
+        click_link label.title
+      end
+
+      expect(find('.js-label-select')).to have_content(label.title)
+
+      page.within '.dropdown-menu-labels' do
+        click_link label.title
+      end
+
+      expect(find('.js-label-select')).to have_content('Labels')
+    end
   end
 
   context 'edit issue' do