diff --git a/app/models/label.rb b/app/models/label.rb
index ce98257967597b0664894c474520f7d1baaea1ed..b8dc11a5245f53e763fa1a5170eb240f20c00332 100644
--- a/app/models/label.rb
+++ b/app/models/label.rb
@@ -7,13 +7,14 @@ class Label < ActiveRecord::Base
   validates :project, presence: true
 
   # Dont allow '?', '&', and ',' for label titles
-  validates :title, presence: true, format: { with: /\A[^&\?,&]*\z/ }
+  validates :title,
+            presence: true,
+            format: { with: /\A[^&\?,&]*\z/ },
+            uniqueness: true
 
   scope :order_by_name, -> { reorder("labels.title ASC") }
 
-  def name
-    title
-  end
+  alias_attribute :name, :title
 
   def open_issues_count
     issues.opened.count
diff --git a/app/models/project.rb b/app/models/project.rb
index a24eae7d26b59eed531cc087ff21f4cc6570c776..7f6aa6d42493dfd36b2ff9de4c99c72360126cea 100644
--- a/app/models/project.rb
+++ b/app/models/project.rb
@@ -577,4 +577,8 @@ class Project < ActiveRecord::Base
   def forks_count
     ForkedProjectLink.where(forked_from_project_id: self.id).count
   end
+
+  def find_label(name)
+    labels.find_by(name: name)
+  end
 end
diff --git a/doc/api/README.md b/doc/api/README.md
index a0a9ba6f4b68c1ac7c9c9e353833660a672db49a..44e95ed82582101cc65ed55c985f465de0ed723e 100644
--- a/doc/api/README.md
+++ b/doc/api/README.md
@@ -12,6 +12,7 @@
 - [Branches](branches.md)
 - [Merge Requests](merge_requests.md)
 - [Issues](issues.md)
+- [Labels](labels.md)
 - [Milestones](milestones.md)
 - [Notes](notes.md) (comments)
 - [Deploy Keys](deploy_keys.md)
diff --git a/doc/api/labels.md b/doc/api/labels.md
new file mode 100644
index 0000000000000000000000000000000000000000..a83d28107cc5b8145302142477506fe902fff828
--- /dev/null
+++ b/doc/api/labels.md
@@ -0,0 +1,63 @@
+# Labels
+
+## List labels
+
+Get all labels for given project.
+
+```
+GET /projects/:id/labels
+```
+
+```json
+[
+    {
+        "name": "Awesome",
+        "color": "#DD10AA"
+    },
+    {
+        "name": "Documentation",
+        "color": "#1E80DD"
+    },
+    {
+        "name": "Feature",
+        "color": "#11FF22"
+    },
+    {
+        "name": "Bug",
+        "color": "#EE1122"
+    }
+]
+```
+
+## Create a new label
+
+Creates a new label for given repository with given name and color.
+
+```
+POST /projects/:id/labels
+```
+
+Parameters:
+
+- `id` (required) - The ID of a project
+- `name` (required) - The name of the label
+- `color` (required) -  Color of the label given in 6-digit hex notation with leading '#' sign (e.g. #FFAABB)
+
+It returns 200 and the newly created label, if the operation succeeds.
+If the label already exists, 409 and an error message is returned.
+If label parameters are invalid, 405 and an explaining error message is returned.
+
+## Delete a label
+
+Deletes a label given by its name.
+
+```
+DELETE /projects/:id/labels
+```
+
+- `id` (required) - The ID of a project
+- `name` (required) - The name of the label to be deleted
+
+It returns 200 if the label successfully was deleted, 404 for wrong parameters
+and 400 if the label does not exist.
+In case of an error, additionally an error is returned.
diff --git a/doc/api/projects.md b/doc/api/projects.md
index b8876e8e104bd3ed707e7b4b2c2de23145f65ab7..894c2fd76a475ac9da3e6982a3a1e37311e4d967 100644
--- a/doc/api/projects.md
+++ b/doc/api/projects.md
@@ -632,29 +632,3 @@ Parameters:
 +   query (required) - A string contained in the project name
 +   per_page (optional) - number of projects to return per page
 +   page (optional) - the page to retrieve
-
-
-## Labels
-
-### List project labels
-
-Get a list of project labels.
-
-```
-GET /projects/:id/labels
-```
-
-Parameters:
-
-+ `id` (required) - The ID or NAMESPACE/PROJECT_NAME of a project
-
-```json
-[
-  {
-    "name": "feature"
-  },
-  {
-    "name": "bug"
-  }
-]
-```
diff --git a/lib/api/api.rb b/lib/api/api.rb
index ce4cc8b34f7e22cc7fdf7ed2942befab4b71edf7..2c7cd9038c3504d33abe0e9a5104a45e5a5b73f7 100644
--- a/lib/api/api.rb
+++ b/lib/api/api.rb
@@ -46,5 +46,6 @@ module API
     mount Commits
     mount Namespaces
     mount Branches
+    mount Labels
   end
 end
diff --git a/lib/api/entities.rb b/lib/api/entities.rb
index 8731db59e579818c2f4361565caae955e6593985..9f1e5cded538e7933f05387c0c832b52e2cc3dd2 100644
--- a/lib/api/entities.rb
+++ b/lib/api/entities.rb
@@ -192,7 +192,7 @@ module API
     end
 
     class Label < Grape::Entity
-      expose :name
+      expose :name, :color
     end
 
     class RepoDiff < Grape::Entity
diff --git a/lib/api/labels.rb b/lib/api/labels.rb
new file mode 100644
index 0000000000000000000000000000000000000000..dc61294d5882d9ca8ef8e04c6a727826eb55dee4
--- /dev/null
+++ b/lib/api/labels.rb
@@ -0,0 +1,65 @@
+module API
+  # Labels API
+  class Labels < Grape::API
+    before { authenticate! }
+
+    resource :projects do
+      # Get all labels of the project
+      #
+      # Parameters:
+      #   id (required) - The ID of a project
+      # Example Request:
+      #   GET /projects/:id/labels
+      get ':id/labels' do
+        present user_project.labels, with: Entities::Label
+      end
+
+      # Creates a new label
+      #
+      # Parameters:
+      #   id    (required) - The ID of a project
+      #   name  (required) - The name of the label to be deleted
+      #   color (required) - Color of the label given in 6-digit hex
+      #                      notation with leading '#' sign (e.g. #FFAABB)
+      # Example Request:
+      #   POST /projects/:id/labels
+      post ':id/labels' do
+        required_attributes! [:name, :color]
+
+        attrs = attributes_for_keys [:name, :color]
+        label = user_project.find_label(attrs[:name])
+
+        if label
+          return render_api_error!('Label already exists', 409)
+        end
+
+        label = user_project.labels.create(attrs)
+
+        if label.valid?
+          present label, with: Entities::Label
+        else
+          render_api_error!(label.errors.full_messages.join(', '), 405)
+        end
+      end
+
+      # Deletes an existing label
+      #
+      # Parameters:
+      #   id    (required) - The ID of a project
+      #   name  (required) - The name of the label to be deleted
+      #
+      # Example Request:
+      #   DELETE /projects/:id/labels
+      delete ':id/labels' do
+        required_attributes! [:name]
+
+        label = user_project.find_label(params[:name])
+        if !label
+          return render_api_error!('Label not found', 404)
+        end
+
+        label.destroy
+      end
+    end
+  end
+end
diff --git a/lib/api/projects.rb b/lib/api/projects.rb
index 149678e680307a8ea3a54697aa9f263809a31170..55f7975bbf776f80a3dd0280c9ce4a92441729d8 100644
--- a/lib/api/projects.rb
+++ b/lib/api/projects.rb
@@ -224,17 +224,6 @@ module API
         @users = paginate @users
         present @users, with: Entities::UserBasic
       end
-
-      # Get a project labels
-      #
-      # Parameters:
-      #   id (required) - The ID of a project
-      # Example Request:
-      #   GET /projects/:id/labels
-      get ':id/labels' do
-        @labels = user_project.labels
-        present @labels, with: Entities::Label
-      end
     end
   end
 end
diff --git a/spec/requests/api/labels_spec.rb b/spec/requests/api/labels_spec.rb
index d40c2c21cec339c9492547c06c313baa418ae939..6a633e666b3b27cb871555641d8e445df146d9d2 100644
--- a/spec/requests/api/labels_spec.rb
+++ b/spec/requests/api/labels_spec.rb
@@ -21,4 +21,69 @@ describe API::API, api: true  do
       json_response.first['name'].should == label1.name
     end
   end
+
+  describe 'POST /projects/:id/labels' do
+    it 'should return created label' do
+      post api("/projects/#{project.id}/labels", user),
+           name: 'Foo',
+           color: '#FFAABB'
+      response.status.should == 201
+      json_response['name'].should == 'Foo'
+      json_response['color'].should == '#FFAABB'
+    end
+
+    it 'should return a 400 bad request if name not given' do
+      post api("/projects/#{project.id}/labels", user), color: '#FFAABB'
+      response.status.should == 400
+    end
+
+    it 'should return a 400 bad request if color not given' do
+      post api("/projects/#{project.id}/labels", user), name: 'Foobar'
+      response.status.should == 400
+    end
+
+    it 'should return 405 for invalid color' do
+      post api("/projects/#{project.id}/labels", user),
+           name: 'Foo',
+           color: '#FFAA'
+      response.status.should == 405
+      json_response['message'].should == 'Color is invalid'
+    end
+
+    it 'should return 405 for invalid name' do
+      post api("/projects/#{project.id}/labels", user),
+           name: '?',
+           color: '#FFAABB'
+      response.status.should == 405
+      json_response['message'].should == 'Title is invalid'
+    end
+
+    it 'should return 409 if label already exists' do
+      post api("/projects/#{project.id}/labels", user),
+           name: 'label1',
+           color: '#FFAABB'
+      response.status.should == 409
+      json_response['message'].should == 'Label already exists'
+    end
+  end
+
+  describe 'DELETE /projects/:id/labels' do
+    it 'should return 200 for existing label' do
+      delete api("/projects/#{project.id}/labels", user),
+             name: 'label1'
+      response.status.should == 200
+    end
+
+    it 'should return 404 for non existing label' do
+      delete api("/projects/#{project.id}/labels", user),
+             name: 'label2'
+      response.status.should == 404
+      json_response['message'].should == 'Label not found'
+    end
+
+    it 'should return 400 for wrong parameters' do
+      delete api("/projects/#{project.id}/labels", user)
+      response.status.should == 400
+    end
+  end
 end