diff --git a/README.md b/README.md
index 66ff6df..fd6944d 100644
--- a/README.md
+++ b/README.md
@@ -68,6 +68,7 @@ This action supports three tag levels for flexible versioning:
         reviewer: octocat
         assignee: octocat
         label: enhancement
+        create_missing_labels: false
         milestone: My milestone
         project: Engineering Roadmap
         draft: true
@@ -82,29 +83,30 @@ This action supports three tag levels for flexible versioning:
 
 
 ### 🔧 Input Parameters
-| Input Variable    | Required | Default                       | Description                                                                                                             |
-|-------------------|----------|-------------------------------|-------------------------------------------------------------------------------------------------------------------------|
-| `github_token`    | **Yes**  | `""`                          | GitHub token `${{ secrets.GITHUB_TOKEN }}`                                                                              |
-| `repository`      | No       | `${{ github.repository }}`    | Target repository in `owner/name` format used for API calls and git remote auth                                         |
-| `repository_path` | No       | `.`                           | Relative path under `GITHUB_WORKSPACE` to the checked-out repository                                                    |
-| `source_branch`   | No       | *current branch*              | Name of the source branch                                                                                               |
-| `target_branch`   | No       | `master`                      | Name of the target branch. Change it if you use `main`                                                                  |
-| `title`           | No       | *subject of the first commit* | Pull request title                                                                                                      |
-| `template`        | No       | `""`                          | Template file location                                                                                                  |
-| `body`            | No       | *list of commits*             | Pull request body                                                                                                       |
-| `reviewer`        | No       | `""`                          | Reviewer's username                                                                                                     |
-| `assignee`        | No       | `""`                          | Assignee's usernames                                                                                                    |
-| `label`           | No       | `""`                          | Labels to apply, comma separated                                                                                        |
-| `milestone`       | No       | `""`                          | Milestone                                                                                                               |
-| `project`         | No       | `""`                          | GitHub Project title to add the pull request to                                                                         |
-| `draft`           | No       | `false`                       | Whether to mark it as a draft                                                                                           |
-| `old_string`      | No       | `""`                          | Old string for the replacement in the template                                                                          |
-| `new_string`      | No       | `""`                          | New string for the replacement in the template. If not specified, but `old_string` was, it will gather commits subjects |
-| `get_diff`        | No       | `false`                       | Whether to replace predefined comments with differences between branches - see details below                            |
-| `ignore_users`    | No       | `"dependabot"`                | List of users to ignore, comma separated                                                                                |
-| `allow_no_diff`   | No       | `false`                       | Allows to continue on merge commits with no diffs                                                                       |
-| `max_body_bytes`  | No       | `65000`                       | Maximum PR body size in bytes before overflow is posted as managed PR comments                                          |
-| `max_diff_lines`  | No       | `0`                           | Maximum lines per generated diff section (`0` means unlimited)                                                          |
+| Input Variable          | Required | Default                       | Description                                                                                                             |
+|-------------------------|----------|-------------------------------|-------------------------------------------------------------------------------------------------------------------------|
+| `github_token`          | **Yes**  | `""`                          | GitHub token `${{ secrets.GITHUB_TOKEN }}`                                                                              |
+| `repository`            | No       | `${{ github.repository }}`    | Target repository in `owner/name` format used for API calls and git remote auth                                         |
+| `repository_path`       | No       | `.`                           | Relative path under `GITHUB_WORKSPACE` to the checked-out repository                                                    |
+| `source_branch`         | No       | *current branch*              | Name of the source branch                                                                                               |
+| `target_branch`         | No       | `master`                      | Name of the target branch. Change it if you use `main`                                                                  |
+| `title`                 | No       | *subject of the first commit* | Pull request title                                                                                                      |
+| `template`              | No       | `""`                          | Template file location                                                                                                  |
+| `body`                  | No       | *list of commits*             | Pull request body                                                                                                       |
+| `reviewer`              | No       | `""`                          | Reviewer's username                                                                                                     |
+| `assignee`              | No       | `""`                          | Assignee's usernames                                                                                                    |
+| `label`                 | No       | `""`                          | Labels to apply, comma separated. GitHub-supported special characters such as `/` work; commas remain the separator.    |
+| `create_missing_labels` | No       | `false`                       | Create labels that do not exist yet before PR creation. Existing labels are reused without being refreshed.             |
+| `milestone`             | No       | `""`                          | Milestone                                                                                                               |
+| `project`               | No       | `""`                          | GitHub Project title to add the pull request to                                                                         |
+| `draft`                 | No       | `false`                       | Whether to mark it as a draft                                                                                           |
+| `old_string`            | No       | `""`                          | Old string for the replacement in the template                                                                          |
+| `new_string`            | No       | `""`                          | New string for the replacement in the template. If not specified, but `old_string` was, it will gather commits subjects |
+| `get_diff`              | No       | `false`                       | Whether to replace predefined comments with differences between branches - see details below                            |
+| `ignore_users`          | No       | `"dependabot"`                | List of users to ignore, comma separated                                                                                |
+| `allow_no_diff`         | No       | `false`                       | Allows to continue on merge commits with no diffs                                                                       |
+| `max_body_bytes`        | No       | `65000`                       | Maximum PR body size in bytes before overflow is posted as managed PR comments                                          |
+| `max_diff_lines`        | No       | `0`                           | Maximum lines per generated diff section (`0` means unlimited)                                                          |
 
 
 ### 🔐 Required Workflow Permissions
@@ -121,6 +123,7 @@ permissions:
 - `contents: read` is required to read repository state.
 - `pull-requests: write` is required to create and update pull requests.
 - `issues: write` is required when managed overflow comments are created, updated, or deleted (including cleanup on later runs).
+- `issues: write` is also required when `create_missing_labels=true`, because label creation uses the repository labels API.
 - Project assignment via `project` requires a token/auth context that `gh` can use with project access.
 
 
@@ -219,7 +222,8 @@ jobs:
           repository_path: repo
           title: ${{ github.event.commits[0].message }}
           assignee: ${{ github.actor }}
-          label: automatic,feature
+          label: automatic,team/platform
+          create_missing_labels: true
           project: Engineering Roadmap
           template: .github/PULL_REQUEST_TEMPLATE/FEATURE.md
           old_string: "**Write your description here**"
diff --git a/action.yml b/action.yml
index a21939d..62826c0 100644
--- a/action.yml
+++ b/action.yml
@@ -45,6 +45,10 @@ inputs:
     description: Labels to apply, coma separated
     required: false
     default: ""
+  create_missing_labels:
+    description: Whether to create labels that do not already exist before creating the PR
+    required: false
+    default: "false"
   milestone:
     description: Milestone
     required: false
diff --git a/entrypoint.sh b/entrypoint.sh
index 33b069f..0537149 100755
--- a/entrypoint.sh
+++ b/entrypoint.sh
@@ -24,6 +24,12 @@ REPOSITORY_PATH=""
 WORKSPACE_DIR=""
 REPO_DIR=""
 PROJECT_VALUE=""
+ALLOW_NO_DIFF_VALUE=""
+GET_DIFF_VALUE=""
+DRAFT_VALUE=""
+CREATE_MISSING_LABELS_VALUE=""
+REPOSITORY_LABELS_JSON=""
+DEFAULT_CREATED_LABEL_COLOR="0366d6"
 
 REPLACE_TEMPLATE_SCRIPT="/scripts/replace-template-diff.sh"
 if [[ ! -x "${REPLACE_TEMPLATE_SCRIPT}" ]]; then
@@ -88,6 +94,19 @@ validate_number_input() {
   fi
 }
 
+validate_boolean_input() {
+  local value="$1"
+  local input_name="$2"
+
+  case "${value}" in
+    true|false) ;;
+    *)
+      echo -e "\n[ERROR] Input '${input_name}' must be 'true' or 'false'. Got: ${value}" >&2
+      exit 1
+      ;;
+  esac
+}
+
 apply_line_cap() {
   local file_path="$1"
   local max_lines="$2"
@@ -184,24 +203,134 @@ trim_whitespace() {
 : "${INPUT_ALLOW_NO_DIFF:=false}"
 : "${INPUT_MAX_BODY_BYTES:=65000}"
 : "${INPUT_MAX_DIFF_LINES:=0}"
+: "${INPUT_CREATE_MISSING_LABELS:=false}"
+
+parse_csv_values() {
+  local csv_value="$1"
+  local -n values_ref="$2"
+  local raw_value trimmed_value
+  local value
+  local -a raw_values=()
+  local -A seen_values=()
+
+  values_ref=()
+
+  if [[ -z "${csv_value}" ]]; then
+    return 0
+  fi
+
+  IFS=',' read -r -a raw_values <<< "${csv_value}"
+  for raw_value in "${raw_values[@]}"; do
+    trimmed_value="$(trim_whitespace "${raw_value}")"
+    if [[ -z "${trimmed_value}" || -n "${seen_values["${trimmed_value}"]+x}" ]]; then
+      continue
+    fi
+    values_ref+=("${trimmed_value}")
+    seen_values["${trimmed_value}"]=1
+  done
+}
 
 append_csv_arg() {
   local flag="$1"
   local csv_value="$2"
   local -n args_ref="$3"
-  local raw_value trimmed_value
+  local value
   local -a parsed_values
 
-  if [[ -z "${csv_value}" ]]; then
+  parse_csv_values "${csv_value}" parsed_values
+  for value in "${parsed_values[@]}"; do
+    if [[ -n "${value}" ]]; then
+      args_ref+=("${flag}" "${value}")
+    fi
+  done
+}
+
+load_repository_labels_json() {
+  if [[ -n "${REPOSITORY_LABELS_JSON}" ]]; then
     return 0
   fi
 
-  IFS=',' read -r -a parsed_values <<< "${csv_value}"
-  for raw_value in "${parsed_values[@]}"; do
-    trimmed_value="$(trim_whitespace "${raw_value}")"
-    if [[ -n "${trimmed_value}" ]]; then
-      args_ref+=("${flag}" "${trimmed_value}")
-    fi
+  REPOSITORY_LABELS_JSON="$(
+    gh api "repos/${TARGET_REPOSITORY}/labels?per_page=100" --paginate | jq -sc '
+      [
+        .[]
+        | if type == "array" then .[] else . end
+      ]
+    '
+  )"
+}
+
+label_exists() {
+  local label_name="$1"
+
+  load_repository_labels_json
+  jq -e --arg name "${label_name}" 'any(.[]?; (.name // "") == $name)' <<< "${REPOSITORY_LABELS_JSON}" >/dev/null
+}
+
+append_label_to_cache() {
+  local label_name="$1"
+
+  if [[ -z "${REPOSITORY_LABELS_JSON}" ]]; then
+    return 0
+  fi
+
+  REPOSITORY_LABELS_JSON="$(
+    jq -c --arg name "${label_name}" '. + [{"name": $name}]' <<< "${REPOSITORY_LABELS_JSON}"
+  )"
+}
+
+create_label_if_missing() {
+  local label_name="$1"
+  local create_output=""
+  local create_status=0
+
+  if label_exists "${label_name}"; then
+    echo -e "\n[INFO] Label already exists: ${label_name}"
+    return 0
+  fi
+
+  echo -e "\n[INFO] Creating missing label: ${label_name}"
+  set +e
+  create_output="$(
+    gh api --method POST "repos/${TARGET_REPOSITORY}/labels" \
+      --raw-field "name=${label_name}" \
+      --raw-field "color=${DEFAULT_CREATED_LABEL_COLOR}" 2>&1
+  )"
+  create_status="$?"
+  set -e
+
+  if [[ "${create_status}" == "0" ]]; then
+    append_label_to_cache "${label_name}"
+    return 0
+  fi
+
+  REPOSITORY_LABELS_JSON=""
+  if label_exists "${label_name}"; then
+    echo -e "\n[INFO] Label became available during creation attempt: ${label_name}"
+    return 0
+  fi
+
+  echo -e "\n[ERROR] Failed to create label '${label_name}'." >&2
+  echo "${create_output}" >&2
+  return "${create_status}"
+}
+
+ensure_labels_exist() {
+  local csv_labels="$1"
+  local label_name
+  local -a label_values=()
+
+  if [[ "${CREATE_MISSING_LABELS_VALUE}" != "true" ]]; then
+    return 0
+  fi
+
+  parse_csv_values "${csv_labels}" label_values
+  if [[ "${#label_values[@]}" == "0" ]]; then
+    return 0
+  fi
+
+  for label_name in "${label_values[@]}"; do
+    create_label_if_missing "${label_name}"
   done
 }
 
@@ -351,12 +480,21 @@ echo "  ignore_users: ${INPUT_IGNORE_USERS}"
 echo "  allow_no_diff: ${INPUT_ALLOW_NO_DIFF}"
 echo "  max_body_bytes: ${INPUT_MAX_BODY_BYTES}"
 echo "  max_diff_lines: ${INPUT_MAX_DIFF_LINES}"
+echo "  create_missing_labels: ${INPUT_CREATE_MISSING_LABELS}"
 
 MAX_BODY_BYTES="${INPUT_MAX_BODY_BYTES:-65000}"
 MAX_DIFF_LINES="${INPUT_MAX_DIFF_LINES:-0}"
 PROJECT_VALUE="$(trim_whitespace "${INPUT_PROJECT}")"
+ALLOW_NO_DIFF_VALUE="$(trim_whitespace "${INPUT_ALLOW_NO_DIFF}")"
+GET_DIFF_VALUE="$(trim_whitespace "${INPUT_GET_DIFF}")"
+DRAFT_VALUE="$(trim_whitespace "${INPUT_DRAFT}")"
+CREATE_MISSING_LABELS_VALUE="$(trim_whitespace "${INPUT_CREATE_MISSING_LABELS}")"
 validate_number_input "${MAX_BODY_BYTES}" "max_body_bytes"
 validate_number_input "${MAX_DIFF_LINES}" "max_diff_lines"
+validate_boolean_input "${ALLOW_NO_DIFF_VALUE}" "allow_no_diff"
+validate_boolean_input "${GET_DIFF_VALUE}" "get_diff"
+validate_boolean_input "${DRAFT_VALUE}" "draft"
+validate_boolean_input "${CREATE_MISSING_LABELS_VALUE}" "create_missing_labels"
 
 if (( MAX_BODY_BYTES < 2048 )); then
   echo -e "\n[ERROR] Input 'max_body_bytes' must be at least 2048. Got: ${MAX_BODY_BYTES}" >&2
@@ -470,7 +608,7 @@ fi
 
 echo -e "\nComparing branches by diff..."
 if git diff --quiet "${TARGET_COMPARE_REF}...${SOURCE_COMPARE_REF}"; then
-  if [[ "${INPUT_ALLOW_NO_DIFF}" == "true" ]]; then
+  if [[ "${ALLOW_NO_DIFF_VALUE}" == "true" ]]; then
     echo -e "\n[INFO] Both branches are the same. Continuing."
   else
     echo -e "\n[INFO] Both branches are the same. No action needed."
@@ -522,7 +660,7 @@ if [[ -n "${INPUT_OLD_STRING}" ]]; then
   fi
 fi
 
-if [[ "${INPUT_GET_DIFF}" ==  "true" ]]; then
+if [[ "${GET_DIFF_VALUE}" ==  "true" ]]; then
   echo -e "\nReplacing predefined fields with git information..."
   REPLACE_SUMMARY="false"
   REPLACE_COMMITS="false"
@@ -607,6 +745,7 @@ if [[ -z "${PR_NUMBER}" ]]; then
     --title "${TITLE}"
     --body-file /tmp/template
   )
+  ensure_labels_exist "${INPUT_LABEL}"
   append_csv_arg --reviewer "${INPUT_REVIEWER}" GH_CREATE_ARGS
   append_csv_arg --assignee "${INPUT_ASSIGNEE}" GH_CREATE_ARGS
   append_csv_arg --label "${INPUT_LABEL}" GH_CREATE_ARGS
@@ -617,7 +756,7 @@ if [[ -z "${PR_NUMBER}" ]]; then
   if [[ -n "${PROJECT_VALUE}" ]]; then
     GH_CREATE_ARGS+=(--project "${PROJECT_VALUE}")
   fi
-  if [[ "${INPUT_DRAFT}" ==  "true" ]]; then
+  if [[ "${DRAFT_VALUE}" ==  "true" ]]; then
     GH_CREATE_ARGS+=(--draft)
   fi
 
diff --git a/tests/unit/test_input_limits_validation.sh b/tests/unit/test_input_limits_validation.sh
index 91560f6..4747968 100755
--- a/tests/unit/test_input_limits_validation.sh
+++ b/tests/unit/test_input_limits_validation.sh
@@ -20,40 +20,56 @@ assert_contains() {
 
 LOG_FILE="${TMP_DIR}/run.log"
 
-set +e
-GITHUB_ACTOR="ci-user" \
-GITHUB_TOKEN="token" \
-GITHUB_REPOSITORY="owner/repo" \
-GITHUB_WORKSPACE="${TMP_DIR}" \
-GITHUB_OUTPUT="${TMP_DIR}/output.txt" \
-INPUT_GITHUB_TOKEN="token" \
-INPUT_SOURCE_BRANCH="develop" \
-INPUT_TARGET_BRANCH="main" \
-INPUT_TITLE="" \
-INPUT_TEMPLATE="" \
-INPUT_BODY="" \
-INPUT_REVIEWER="" \
-INPUT_ASSIGNEE="" \
-INPUT_LABEL="" \
-INPUT_MILESTONE="" \
-INPUT_DRAFT="false" \
-INPUT_GET_DIFF="false" \
-INPUT_OLD_STRING="" \
-INPUT_NEW_STRING="" \
-INPUT_IGNORE_USERS="dependabot" \
-INPUT_ALLOW_NO_DIFF="false" \
-INPUT_MAX_BODY_BYTES="invalid" \
-INPUT_MAX_DIFF_LINES="0" \
-bash "${SCRIPT_PATH}" >"${LOG_FILE}" 2>&1
-STATUS="$?"
-set -e
-
-if [[ "${STATUS}" == "0" ]]; then
-  echo "Expected non-zero exit code for invalid max_body_bytes" >&2
-  cat "${LOG_FILE}" >&2
-  exit 1
-fi
-
-assert_contains "${LOG_FILE}" "Input 'max_body_bytes' must be a non-negative integer"
+run_invalid_case() {
+  local draft_value="$1"
+  local get_diff_value="$2"
+  local allow_no_diff_value="$3"
+  local create_missing_labels_value="$4"
+  local max_body_bytes_value="$5"
+  local expected_message="$6"
+
+  set +e
+  GITHUB_ACTOR="ci-user" \
+  GITHUB_TOKEN="token" \
+  GITHUB_REPOSITORY="owner/repo" \
+  GITHUB_WORKSPACE="${TMP_DIR}" \
+  GITHUB_OUTPUT="${TMP_DIR}/output.txt" \
+  INPUT_GITHUB_TOKEN="token" \
+  INPUT_SOURCE_BRANCH="develop" \
+  INPUT_TARGET_BRANCH="main" \
+  INPUT_TITLE="" \
+  INPUT_TEMPLATE="" \
+  INPUT_BODY="" \
+  INPUT_REVIEWER="" \
+  INPUT_ASSIGNEE="" \
+  INPUT_LABEL="" \
+  INPUT_MILESTONE="" \
+  INPUT_DRAFT="${draft_value}" \
+  INPUT_GET_DIFF="${get_diff_value}" \
+  INPUT_OLD_STRING="" \
+  INPUT_NEW_STRING="" \
+  INPUT_IGNORE_USERS="dependabot" \
+  INPUT_ALLOW_NO_DIFF="${allow_no_diff_value}" \
+  INPUT_MAX_BODY_BYTES="${max_body_bytes_value}" \
+  INPUT_MAX_DIFF_LINES="0" \
+  INPUT_CREATE_MISSING_LABELS="${create_missing_labels_value}" \
+  bash "${SCRIPT_PATH}" >"${LOG_FILE}" 2>&1
+  STATUS="$?"
+  set -e
+
+  if [[ "${STATUS}" == "0" ]]; then
+    echo "Expected non-zero exit code for invalid input" >&2
+    cat "${LOG_FILE}" >&2
+    exit 1
+  fi
+
+  assert_contains "${LOG_FILE}" "${expected_message}"
+}
+
+run_invalid_case "false" "false" "false" "false" "invalid" "Input 'max_body_bytes' must be a non-negative integer"
+run_invalid_case "maybe" "false" "false" "false" "65000" "Input 'draft' must be 'true' or 'false'. Got: maybe"
+run_invalid_case "false" "sometimes" "false" "false" "65000" "Input 'get_diff' must be 'true' or 'false'. Got: sometimes"
+run_invalid_case "false" "false" "1" "false" "65000" "Input 'allow_no_diff' must be 'true' or 'false'. Got: 1"
+run_invalid_case "false" "false" "false" "sure" "65000" "Input 'create_missing_labels' must be 'true' or 'false'. Got: sure"
 
 echo "Input limits validation test passed."
diff --git a/tests/unit/test_label_creation.sh b/tests/unit/test_label_creation.sh
new file mode 100755
index 0000000..2760822
--- /dev/null
+++ b/tests/unit/test_label_creation.sh
@@ -0,0 +1,302 @@
+#!/usr/bin/env bash
+
+set -Eeuo pipefail
+
+SCRIPT_DIR="$(cd "$(dirname "$0")" && pwd -P)"
+SCRIPT_PATH="${SCRIPT_DIR}/../../entrypoint.sh"
+
+assert_contains() {
+  local file_path="$1"
+  local expected="$2"
+  if ! grep -Fq -- "${expected}" "${file_path}"; then
+    echo "Assertion failed. Expected to find: ${expected}" >&2
+    echo "----- FILE CONTENT -----" >&2
+    cat "${file_path}" >&2
+    exit 1
+  fi
+}
+
+assert_not_contains() {
+  local file_path="$1"
+  local unexpected="$2"
+  if grep -Fq -- "${unexpected}" "${file_path}"; then
+    echo "Assertion failed. Expected not to find: ${unexpected}" >&2
+    echo "----- FILE CONTENT -----" >&2
+    cat "${file_path}" >&2
+    exit 1
+  fi
+}
+
+setup_case() {
+  local case_dir="$1"
+
+  mkdir -p "${case_dir}/bin"
+  mkdir -p "${case_dir}/repo"
+
+  cat > "${case_dir}/bin/git" <<'EOF'
+#!/usr/bin/env bash
+set -Eeuo pipefail
+
+args=("$@")
+if [[ "${#args[@]}" -ge 2 && "${args[0]}" == "-C" ]]; then
+  args=("${args[@]:2}")
+fi
+
+if [[ "${#args[@]}" -ge 2 && "${args[0]}" == "config" && "${args[1]}" == "--global" ]]; then
+  exit 0
+fi
+
+if [[ "${#args[@]}" -ge 1 && "${args[0]}" == "config" ]]; then
+  exit 0
+fi
+
+if [[ "${#args[@]}" -ge 2 && "${args[0]}" == "remote" && "${args[1]}" == "set-url" ]]; then
+  exit 0
+fi
+
+if [[ "${#args[@]}" -ge 1 && "${args[0]}" == "fetch" ]]; then
+  exit 0
+fi
+
+if [[ "${#args[@]}" -ge 2 && "${args[0]}" == "rev-parse" && "${args[1]}" == "--is-inside-work-tree" ]]; then
+  echo "true"
+  exit 0
+fi
+
+if [[ "${#args[@]}" -ge 2 && "${args[0]}" == "show-ref" ]]; then
+  last_arg="${args[$((${#args[@]} - 1))]}"
+  if [[ "${last_arg}" == "refs/remotes/origin/develop" || "${last_arg}" == "refs/remotes/origin/release/MAPL-v3" ]]; then
+    exit 0
+  fi
+  exit 1
+fi
+
+if [[ "${#args[@]}" -ge 2 && "${args[0]}" == "rev-parse" ]]; then
+  last_arg="${args[$((${#args[@]} - 1))]}"
+  if [[ "${last_arg}" == "origin/develop" ]]; then
+    echo "bbb222"
+    exit 0
+  fi
+  if [[ "${last_arg}" == "origin/release/MAPL-v3" ]]; then
+    echo "aaa111"
+    exit 0
+  fi
+fi
+
+if [[ "${#args[@]}" -ge 2 && "${args[0]}" == "diff" && "${args[1]}" == "--quiet" ]]; then
+  exit 1
+fi
+
+if [[ "${#args[@]}" -ge 1 && "${args[0]}" == "diff" ]]; then
+  echo "M README.md"
+  exit 0
+fi
+
+if [[ "${#args[@]}" -ge 1 && "${args[0]}" == "log" ]]; then
+  echo "stub log"
+  exit 0
+fi
+
+if [[ "${#args[@]}" -ge 2 && "${args[0]}" == "symbolic-ref" ]]; then
+  echo "develop"
+  exit 0
+fi
+
+echo "Unsupported git call: $*" >&2
+exit 1
+EOF
+
+  cat > "${case_dir}/bin/gh" <<'EOF'
+#!/usr/bin/env bash
+set -Eeuo pipefail
+
+printf '%s\n' "$*" >> "${GH_CALLS_LOG}"
+
+if [[ "$#" -ge 3 && "$1" == "api" && "$2" == "--method" && "$3" == "GET" && "$4" == "repos/owner/repo/pulls?state=open&base=release/MAPL-v3" ]]; then
+  echo "[]"
+  exit 0
+fi
+
+if [[ "$#" -ge 2 && "$1" == "api" && "$2" == "repos/owner/repo/labels?per_page=100" ]]; then
+  if [[ "${GH_FAIL_ON_LABEL_LOOKUP:-false}" == "true" ]]; then
+    echo "Label lookup should not happen in this scenario" >&2
+    exit 1
+  fi
+
+  if [[ -n "${GH_DYNAMIC_LABEL_STATE:-}" && -f "${GH_DYNAMIC_LABEL_STATE}" ]]; then
+    cat "${GH_DYNAMIC_LABEL_STATE}"
+  else
+    printf '%s\n' "${GH_LABELS_RESPONSE:-[]}"
+  fi
+  exit 0
+fi
+
+if [[ "$#" -ge 3 && "$1" == "api" && "$2" == "--method" && "$3" == "POST" && "$4" == "repos/owner/repo/labels" ]]; then
+  label_name=""
+  color_value=""
+  previous=""
+  for arg in "$@"; do
+    if [[ "${previous}" == "--raw-field" ]]; then
+      case "${arg}" in
+        name=*)
+          label_name="${arg#name=}"
+          ;;
+        color=*)
+          color_value="${arg#color=}"
+          ;;
+      esac
+    fi
+    previous="${arg}"
+  done
+
+  printf '%s\n' "${label_name}" >> "${GH_CREATED_LABELS_LOG}"
+  if [[ "${color_value}" != "0366d6" ]]; then
+    echo "Unexpected label color: ${color_value}" >&2
+    exit 1
+  fi
+
+  if [[ "${label_name}" == "zzz-race/label" ]]; then
+    printf '%s\n' '[{"name":"existing label"},{"name":"zzz-new/feature"},{"name":"zzz-race/label"}]' > "${GH_DYNAMIC_LABEL_STATE}"
+    echo "HTTP 422: Validation Failed" >&2
+    exit 1
+  fi
+
+  exit 0
+fi
+
+if [[ "$#" -ge 2 && "$1" == "pr" && "$2" == "create" ]]; then
+  label_values=""
+  previous=""
+  for arg in "$@"; do
+    if [[ "${previous}" == "--label" ]]; then
+      label_values+="${arg}"$'\n'
+    fi
+    previous="${arg}"
+  done
+  printf '%s' "${label_values}" > "${GH_PR_LABELS_LOG}"
+  echo "https://example.test/pr/789"
+  exit 0
+fi
+
+if [[ "$#" -ge 2 && "$1" == "pr" && "$2" == "view" ]]; then
+  echo "789"
+  exit 0
+fi
+
+echo "Unsupported gh call: $*" >&2
+exit 1
+EOF
+
+  cat > "${case_dir}/template.md" <<'EOF'
+## Template body from file
+EOF
+
+  chmod +x "${case_dir}/bin/git" "${case_dir}/bin/gh"
+}
+
+run_case() {
+  local case_dir="$1"
+  local label_value="$2"
+  local create_missing_labels="$3"
+  local log_file="$4"
+
+  set +e
+  PATH="${case_dir}/bin:${PATH}" \
+  GH_CALLS_LOG="${case_dir}/gh-calls.log" \
+  GH_CREATED_LABELS_LOG="${case_dir}/gh-created-labels.log" \
+  GH_PR_LABELS_LOG="${case_dir}/gh-pr-labels.log" \
+  GH_DYNAMIC_LABEL_STATE="${case_dir}/labels-state.json" \
+  GITHUB_ACTOR="ci-user" \
+  GITHUB_TOKEN="token" \
+  GITHUB_REPOSITORY="owner/repo" \
+  GITHUB_WORKSPACE="${case_dir}" \
+  GITHUB_OUTPUT="${case_dir}/output.txt" \
+  INPUT_GITHUB_TOKEN="token" \
+  INPUT_REPOSITORY_PATH="repo" \
+  INPUT_SOURCE_BRANCH="develop" \
+  INPUT_TARGET_BRANCH="release/MAPL-v3" \
+  INPUT_TITLE="My PR title" \
+  INPUT_TEMPLATE="${case_dir}/template.md" \
+  INPUT_BODY="" \
+  INPUT_REVIEWER="" \
+  INPUT_ASSIGNEE="" \
+  INPUT_LABEL="${label_value}" \
+  INPUT_CREATE_MISSING_LABELS="${create_missing_labels}" \
+  INPUT_MILESTONE="" \
+  INPUT_PROJECT="" \
+  INPUT_DRAFT="false" \
+  INPUT_GET_DIFF="false" \
+  INPUT_OLD_STRING="" \
+  INPUT_NEW_STRING="" \
+  INPUT_IGNORE_USERS="dependabot" \
+  INPUT_ALLOW_NO_DIFF="false" \
+  INPUT_MAX_BODY_BYTES="65000" \
+  INPUT_MAX_DIFF_LINES="0" \
+  bash "${SCRIPT_PATH}" >"${log_file}" 2>&1
+  status="$?"
+  set -e
+
+  if [[ "${status}" != "0" ]]; then
+    echo "Expected successful execution" >&2
+    cat "${log_file}" >&2
+    exit 1
+  fi
+}
+
+CASE_ONE_DIR="$(mktemp -d)"
+CASE_TWO_DIR="$(mktemp -d)"
+trap 'rm -rf "${CASE_ONE_DIR}" "${CASE_TWO_DIR}"' EXIT
+
+setup_case "${CASE_ONE_DIR}"
+setup_case "${CASE_TWO_DIR}"
+
+: > "${CASE_ONE_DIR}/gh-calls.log"
+: > "${CASE_ONE_DIR}/gh-created-labels.log"
+: > "${CASE_ONE_DIR}/gh-pr-labels.log"
+CASE_ONE_LOG="${CASE_ONE_DIR}/run.log"
+run_case "${CASE_ONE_DIR}" "bug,zzz-disabled/label" "false" "${CASE_ONE_LOG}"
+assert_not_contains "${CASE_ONE_DIR}/gh-calls.log" "repos/owner/repo/labels?per_page=100"
+assert_not_contains "${CASE_ONE_DIR}/gh-calls.log" "repos/owner/repo/labels --raw-field"
+assert_contains "${CASE_ONE_DIR}/gh-pr-labels.log" "bug"
+assert_contains "${CASE_ONE_DIR}/gh-pr-labels.log" "zzz-disabled/label"
+
+: > "${CASE_TWO_DIR}/gh-calls.log"
+: > "${CASE_TWO_DIR}/gh-created-labels.log"
+: > "${CASE_TWO_DIR}/gh-pr-labels.log"
+printf '%s\n' '[{"name":"existing label"}]' > "${CASE_TWO_DIR}/labels-state.json"
+CASE_TWO_LOG="${CASE_TWO_DIR}/run.log"
+run_case "${CASE_TWO_DIR}" " existing label , zzz-new/feature , zzz-new/feature , zzz-race/label " "true" "${CASE_TWO_LOG}"
+
+assert_contains "${CASE_TWO_DIR}/gh-calls.log" "api repos/owner/repo/labels?per_page=100 --paginate"
+assert_contains "${CASE_TWO_DIR}/gh-calls.log" "api --method POST repos/owner/repo/labels --raw-field name=zzz-new/feature --raw-field color=0366d6"
+assert_contains "${CASE_TWO_DIR}/gh-calls.log" "api --method POST repos/owner/repo/labels --raw-field name=zzz-race/label --raw-field color=0366d6"
+assert_contains "${CASE_TWO_DIR}/gh-created-labels.log" "zzz-new/feature"
+assert_contains "${CASE_TWO_DIR}/gh-created-labels.log" "zzz-race/label"
+assert_not_contains "${CASE_TWO_DIR}/gh-created-labels.log" "existing label"
+if [[ "$(grep -Fc "zzz-new/feature" "${CASE_TWO_DIR}/gh-created-labels.log")" != "1" ]]; then
+  echo "Expected zzz-new/feature to be created once" >&2
+  cat "${CASE_TWO_DIR}/gh-created-labels.log" >&2
+  exit 1
+fi
+if [[ "$(grep -Fc "zzz-race/label" "${CASE_TWO_DIR}/gh-created-labels.log")" != "1" ]]; then
+  echo "Expected zzz-race/label to be attempted once" >&2
+  cat "${CASE_TWO_DIR}/gh-created-labels.log" >&2
+  exit 1
+fi
+
+assert_contains "${CASE_TWO_LOG}" "[INFO] Label already exists: existing label"
+assert_contains "${CASE_TWO_LOG}" "[INFO] Creating missing label: zzz-new/feature"
+assert_contains "${CASE_TWO_LOG}" "[INFO] Label became available during creation attempt: zzz-race/label"
+assert_contains "${CASE_TWO_DIR}/gh-pr-labels.log" "existing label"
+assert_contains "${CASE_TWO_DIR}/gh-pr-labels.log" "zzz-new/feature"
+assert_contains "${CASE_TWO_DIR}/gh-pr-labels.log" "zzz-race/label"
+
+create_line="$(grep -n "api --method POST repos/owner/repo/labels --raw-field name=zzz-new/feature --raw-field color=0366d6" "${CASE_TWO_DIR}/gh-calls.log" | head -1 | cut -d: -f1)"
+pr_create_line="$(grep -n "^pr create" "${CASE_TWO_DIR}/gh-calls.log" | head -1 | cut -d: -f1)"
+if [[ -z "${create_line}" || -z "${pr_create_line}" || "${create_line}" -ge "${pr_create_line}" ]]; then
+  echo "Expected label creation to happen before pr create" >&2
+  cat "${CASE_TWO_DIR}/gh-calls.log" >&2
+  exit 1
+fi
+
+echo "Label creation flow test passed."
diff --git a/tests/unit/test_pr_create_with_gh.sh b/tests/unit/test_pr_create_with_gh.sh
index 69d43d2..a8a50f5 100755
--- a/tests/unit/test_pr_create_with_gh.sh
+++ b/tests/unit/test_pr_create_with_gh.sh
@@ -98,54 +98,75 @@ cat > "${TMP_DIR}/bin/gh" <<'EOF'
 #!/usr/bin/env bash
 set -Eeuo pipefail
 
-cmd="$*"
-
-if [[ "$#" -ge 2 && "$1" == "pr" && "$2" == "list" ]]; then
+if [[ "$#" -ge 3 && "$1" == "api" && "$2" == "--method" && "$3" == "GET" && "$4" == "repos/owner/repo/pulls?state=open&base=release/MAPL-v3" ]]; then
+  echo "[]"
   exit 0
 fi
 
 if [[ "$#" -ge 2 && "$1" == "pr" && "$2" == "create" ]]; then
-  if [[ "${cmd}" != *"--repo owner/repo"* ]]; then
-    echo "Missing --repo" >&2
-    exit 1
-  fi
-  if [[ "${cmd}" != *"--base release/MAPL-v3"* ]]; then
-    echo "Missing --base" >&2
-    exit 1
-  fi
-  if [[ "${cmd}" != *"--head owner:develop"* ]]; then
-    echo "Missing --head" >&2
-    exit 1
-  fi
-  if [[ "${cmd}" != *"--title My PR title"* ]]; then
-    echo "Missing --title" >&2
-    exit 1
-  fi
-  if [[ "${cmd}" != *"--body-file /tmp/template"* ]]; then
-    echo "Missing --body-file" >&2
+  expect_repo="false"
+  expect_base="false"
+  expect_head="false"
+  expect_title="false"
+  expect_body_file="false"
+  expect_milestone="false"
+  expect_project="false"
+  expect_draft="false"
+  reviewer_alice="false"
+  reviewer_bob="false"
+  assignee_one="false"
+  assignee_two="false"
+  label_bug="false"
+  label_chore="false"
+  previous=""
+
+  for arg in "$@"; do
+    case "${previous}:${arg}" in
+      --repo:owner/repo) expect_repo="true" ;;
+      --base:release/MAPL-v3) expect_base="true" ;;
+      --head:owner:develop) expect_head="true" ;;
+      --title:"My PR title") expect_title="true" ;;
+      --body-file:/tmp/template) expect_body_file="true" ;;
+      --reviewer:alice) reviewer_alice="true" ;;
+      --reviewer:bob) reviewer_bob="true" ;;
+      --assignee:assignee1) assignee_one="true" ;;
+      --assignee:assignee2) assignee_two="true" ;;
+      --label:bug) label_bug="true" ;;
+      --label:chore) label_chore="true" ;;
+      --milestone:Milestone-1) expect_milestone="true" ;;
+      --project:Roadmap) expect_project="true" ;;
+    esac
+    if [[ "${arg}" == "--draft" ]]; then
+      expect_draft="true"
+    fi
+    previous="${arg}"
+  done
+
+  if [[ "${expect_repo}" != "true" || "${expect_base}" != "true" || "${expect_head}" != "true" || "${expect_title}" != "true" || "${expect_body_file}" != "true" ]]; then
+    echo "Missing required PR create arguments" >&2
     exit 1
   fi
-  if [[ "${cmd}" != *"--reviewer alice"* || "${cmd}" != *"--reviewer bob"* ]]; then
+  if [[ "${reviewer_alice}" != "true" || "${reviewer_bob}" != "true" ]]; then
     echo "Missing reviewers" >&2
     exit 1
   fi
-  if [[ "${cmd}" != *"--assignee assignee1"* || "${cmd}" != *"--assignee assignee2"* ]]; then
+  if [[ "${assignee_one}" != "true" || "${assignee_two}" != "true" ]]; then
     echo "Missing assignees" >&2
     exit 1
   fi
-  if [[ "${cmd}" != *"--label bug"* || "${cmd}" != *"--label chore"* ]]; then
+  if [[ "${label_bug}" != "true" || "${label_chore}" != "true" ]]; then
     echo "Missing labels" >&2
     exit 1
   fi
-  if [[ "${cmd}" != *"--milestone Milestone-1"* ]]; then
+  if [[ "${expect_milestone}" != "true" ]]; then
     echo "Missing milestone" >&2
     exit 1
   fi
-  if [[ "${cmd}" != *"--project Roadmap"* ]]; then
+  if [[ "${expect_project}" != "true" ]]; then
     echo "Missing project" >&2
     exit 1
   fi
-  if [[ "${cmd}" != *"--draft"* ]]; then
+  if [[ "${expect_draft}" != "true" ]]; then
     echo "Missing draft flag" >&2
     exit 1
   fi