diff --git a/actions/setup/js/safe_outputs_tools.json b/actions/setup/js/safe_outputs_tools.json
index b907d4e37b9..4312fde0b52 100644
--- a/actions/setup/js/safe_outputs_tools.json
+++ b/actions/setup/js/safe_outputs_tools.json
@@ -98,7 +98,7 @@
   },
   {
     "name": "update_discussion",
-    "description": "Update an existing GitHub discussion's title or body. Use this to modify discussion properties after creation. Only the fields you specify will be updated; other fields remain unchanged.",
+    "description": "Update an existing GitHub discussion's title, body, or labels. Use this to modify discussion properties after creation. Only the fields you specify will be updated; other fields remain unchanged.",
     "inputSchema": {
       "type": "object",
       "properties": {
@@ -110,6 +110,11 @@
           "type": "string",
           "description": "New discussion body to replace the existing content. Use Markdown formatting."
         },
+        "labels": {
+          "type": "array",
+          "items": { "type": "string" },
+          "description": "Labels to set on the discussion. Replaces all existing labels. Only labels in the configured allowed-labels list will be applied."
+        },
         "discussion_number": {
           "type": ["number", "string"],
           "description": "Discussion number to update. This is the numeric ID from the GitHub URL (e.g., 345 in github.com/owner/repo/discussions/345). Required when the workflow target is '*' (any discussion)."
diff --git a/actions/setup/js/update_discussion.cjs b/actions/setup/js/update_discussion.cjs
index 036bed7371a..07ed18cb0c4 100644
--- a/actions/setup/js/update_discussion.cjs
+++ b/actions/setup/js/update_discussion.cjs
@@ -8,8 +8,122 @@
 const { isDiscussionContext, getDiscussionNumber } = require("./update_context_helpers.cjs");
 const { createUpdateHandlerFactory, createStandardFormatResult } = require("./update_handler_factory.cjs");
 const { sanitizeTitle } = require("./sanitize_title.cjs");
+const { validateLabels } = require("./safe_output_validator.cjs");
+const { tryEnforceArrayLimit } = require("./limit_enforcement_helpers.cjs");
+const { getErrorMessage } = require("./error_helpers.cjs");
 const { ERR_NOT_FOUND } = require("./error_codes.cjs");
-const { parseBoolTemplatable } = require("./templatable.cjs");
+const { MAX_LABELS } = require("./constants.cjs");
+
+/**
+ * Fetches label node IDs for the given label names from a repository
+ * @param {any} githubClient - GitHub API client
+ * @param {string} owner - Repository owner
+ * @param {string} repo - Repository name
+ * @param {string[]} labelNames - Array of label names to resolve
+ * @returns {Promise<Array<{name: string, id: string}>>} Array of matched label objects with name and ID
+ */
+async function fetchLabelIds(githubClient, owner, repo, labelNames) {
+  if (!labelNames || labelNames.length === 0) {
+    return [];
+  }
+
+  try {
+    const labelsQuery = `
+      query($owner: String!, $repo: String!) {
+        repository(owner: $owner, name: $repo) {
+          labels(first: 100) {
+            nodes {
+              id
+              name
+            }
+          }
+        }
+      }
+    `;
+
+    const queryResult = await githubClient.graphql(labelsQuery, { owner, repo });
+    const repoLabels = queryResult?.repository?.labels?.nodes || [];
+    const labelMap = new Map(repoLabels.map(/** @param {any} l */ l => [l.name.toLowerCase(), l]));
+
+    const matchedLabels = [];
+    const unmatchedLabels = [];
+
+    for (const requestedLabel of labelNames) {
+      const matched = labelMap.get(requestedLabel.toLowerCase());
+      if (matched) {
+        matchedLabels.push({ name: matched.name, id: matched.id });
+      } else {
+        unmatchedLabels.push(requestedLabel);
+      }
+    }
+
+    if (unmatchedLabels.length > 0) {
+      core.warning(`Could not find label IDs for: ${unmatchedLabels.join(", ")}`);
+      core.info(`These labels may not exist in the repository. Available: ${repoLabels.map(/** @param {any} l */ l => l.name).join(", ")}`);
+    }
+
+    return matchedLabels;
+  } catch (error) {
+    core.warning(`Failed to fetch label IDs: ${getErrorMessage(error)}`);
+    return [];
+  }
+}
+
+/**
+ * Removes labels from a discussion using GraphQL
+ * @param {any} githubClient - GitHub API client
+ * @param {string} discussionId - Discussion node ID
+ * @param {string[]} labelIds - Label node IDs to remove
+ * @returns {Promise<void>}
+ */
+async function removeLabelsFromDiscussion(githubClient, discussionId, labelIds) {
+  if (!labelIds || labelIds.length === 0) {
+    return;
+  }
+
+  const mutation = `
+    mutation($labelableId: ID!, $labelIds: [ID!]!) {
+      removeLabelsFromLabelable(input: {
+        labelableId: $labelableId,
+        labelIds: $labelIds
+      }) {
+        labelable {
+          ... on Discussion { id }
+        }
+      }
+    }
+  `;
+
+  await githubClient.graphql(mutation, { labelableId: discussionId, labelIds });
+}
+
+/**
+ * Adds labels to a discussion using GraphQL
+ * @param {any} githubClient - GitHub API client
+ * @param {string} discussionId - Discussion node ID
+ * @param {string[]} labelIds - Label node IDs to add
+ * @returns {Promise<void>}
+ */
+async function addLabelsToDiscussion(githubClient, discussionId, labelIds) {
+  if (!labelIds || labelIds.length === 0) {
+    return;
+  }
+
+  const mutation = `
+    mutation($labelableId: ID!, $labelIds: [ID!]!) {
+      addLabelsToLabelable(input: {
+        labelableId: $labelableId,
+        labelIds: $labelIds
+      }) {
+        labelable {
+          ... on Discussion { id }
+        }
+      }
+    }
+  `;
+
+  await githubClient.graphql(mutation, { labelableId: discussionId, labelIds });
+}
 
 /**
  * Execute the discussion update API call using GraphQL
@@ -20,7 +134,7 @@ const { parseBoolTemplatable } = require("./templatable.cjs");
  * @returns {Promise<any>} Updated discussion
  */
 async function executeDiscussionUpdate(github, context, discussionNumber, updateData) {
-  // First, fetch the discussion node ID
+  // Fetch the discussion node ID and current labels in one query
   const getDiscussionQuery = `
     query($owner: String!, $repo: String!, $number: Int!) {
       repository(owner: $owner, name: $repo) {
@@ -29,6 +143,12 @@ async function executeDiscussionUpdate(github, context, discussionNumber, update
           title
           body
           url
+          labels(first: 100) {
+            nodes {
+              id
+              name
+            }
+          }
         }
       }
     }
@@ -45,28 +165,62 @@ async function executeDiscussionUpdate(github, context, discussionNumber, update
     throw new Error(`${ERR_NOT_FOUND}: Discussion #${discussionNumber} not found`);
   }
 
-  // Build mutation for updating discussion
-  let mutation = `
-    mutation($discussionId: ID!, $title: String, $body: String) {
-      updateDiscussion(input: { discussionId: $discussionId, title: $title, body: $body }) {
-        discussion {
-          id
-          title
-          body
-          url
+  // Update title and/or body if provided
+  if (updateData.title !== undefined || updateData.body !== undefined) {
+    const mutation = `
+      mutation($discussionId: ID!, $title: String, $body: String) {
+        updateDiscussion(input: { discussionId: $discussionId, title: $title, body: $body }) {
+          discussion {
+            id
+            title
+            body
+            url
+          }
         }
       }
-    }
-  `;
+    `;
 
-  const variables = {
-    discussionId: discussion.id,
-    title: updateData.title || discussion.title,
-    body: updateData.body || discussion.body,
-  };
+    const variables = {
+      discussionId: discussion.id,
+      title: updateData.title || discussion.title,
+      body: updateData.body || discussion.body,
+    };
+
+    const mutationResult = await github.graphql(mutation, variables);
+    // Merge updated title/body back into discussion for return value
+    const updated = mutationResult.updateDiscussion.discussion;
+    discussion.title = updated.title;
+    discussion.body = updated.body;
+    discussion.url = updated.url;
+  }
 
-  const mutationResult = await github.graphql(mutation, variables);
-  return mutationResult.updateDiscussion.discussion;
+  // Handle label replacement if labels were provided
+  if (updateData.labels !== undefined) {
+    const currentLabels = discussion.labels?.nodes || [];
+    const currentLabelIds = new Set(currentLabels.map(/** @param {any} l */ l => l.id));
+
+    // Look up node IDs for the requested labels
+    const requestedLabelData = await fetchLabelIds(github, context.repo.owner, context.repo.repo, updateData.labels);
+    const requestedLabelIdSet = new Set(requestedLabelData.map(/** @param {any} l */ l => l.id));
+
+    // Compute add/remove sets
+    const labelsToAdd = requestedLabelData.filter(l => !currentLabelIds.has(l.id)).map(/** @param {any} l */ l => l.id);
+    const labelsToRemove = currentLabels.filter(/** @param {any} l */ l => !requestedLabelIdSet.has(l.id)).map(/** @param {any} l */ l => l.id);
+
+    if (labelsToAdd.length > 0) {
+      core.info(`Adding ${labelsToAdd.length} label(s) to discussion #${discussionNumber}`);
+      await addLabelsToDiscussion(github, discussion.id, labelsToAdd);
+    }
+    if (labelsToRemove.length > 0) {
+      core.info(`Removing ${labelsToRemove.length} label(s) from discussion #${discussionNumber}`);
+      await removeLabelsFromDiscussion(github, discussion.id, labelsToRemove);
+    }
+    if (labelsToAdd.length === 0 && labelsToRemove.length === 0) {
+      core.info(`Labels unchanged for discussion #${discussionNumber}`);
+    }
+  }
+
+  return discussion;
 }
 
 /**
@@ -136,8 +290,31 @@ function buildDiscussionUpdateData(item, config) {
     updateData.body = item.body;
   }
 
-  // Pass footer config to executeUpdate (default to true)
-  updateData._includeFooter = parseBoolTemplatable(config.footer, true);
+  // Handle labels - consistent with update_issue: labels are always processed when provided.
+  // Optional allowed_labels config restricts which labels may be set.
+  if (item.labels !== undefined) {
+    const allowedLabels = config.allowed_labels || [];
+
+    // Enforce max label count
+    const labelsLimitResult = tryEnforceArrayLimit(item.labels, MAX_LABELS, "labels");
+    if (!labelsLimitResult.success) {
+      core.warning(`Discussion label update limit exceeded: ${labelsLimitResult.error}`);
+      return { success: false, error: labelsLimitResult.error };
+    }
+
+    if (allowedLabels.length > 0) {
+      // Filter to allowed labels only; if none remain treat as an empty set
+      const labelsResult = validateLabels(item.labels, allowedLabels);
+      if (!labelsResult.valid) {
+        // All labels were filtered out (e.g. none in allowed list) - treat as empty set
+        updateData.labels = [];
+      } else {
+        updateData.labels = labelsResult.value ?? [];
+      }
+    } else {
+      updateData.labels = item.labels;
+    }
+  }
 
   return { success: true, data: updateData };
 }
@@ -167,4 +344,4 @@ const main = createUpdateHandlerFactory({
   formatSuccessResult: formatDiscussionSuccessResult,
 });
 
-module.exports = { main };
+module.exports = { main, buildDiscussionUpdateData };
diff --git a/actions/setup/js/update_discussion.test.cjs b/actions/setup/js/update_discussion.test.cjs
new file mode 100644
index 00000000000..17122375101
--- /dev/null
+++ b/actions/setup/js/update_discussion.test.cjs
@@ -0,0 +1,289 @@
+// @ts-check
+import { describe, it, expect, beforeEach, vi } from "vitest";
+import { createRequire } from "module";
+
+const require = createRequire(import.meta.url);
+
+describe("update_discussion.cjs - label support", () => {
+  let mockGithub;
+  let mockCore;
+  let mockContext;
+
+  beforeEach(() => {
+    vi.clearAllMocks();
+    vi.resetModules();
+
+    mockCore = {
+      debug: vi.fn(),
+      info: vi.fn(),
+      notice: vi.fn(),
+      warning: vi.fn(),
+      error: vi.fn(),
+      setFailed: vi.fn(),
+      setOutput: vi.fn(),
+      summary: {
+        addRaw: vi.fn().mockReturnThis(),
+        write: vi.fn().mockResolvedValue(undefined),
+      },
+    };
+
+    mockGithub = {
+      graphql: vi.fn(),
+    };
+
+    mockContext = {
+      eventName: "discussion",
+      repo: { owner: "testowner", repo: "testrepo" },
+      serverUrl: "https://github.com",
+      runId: 12345,
+      payload: {
+        discussion: { number: 42 },
+      },
+    };
+
+    global.core = mockCore;
+    global.github = mockGithub;
+    global.context = mockContext;
+  });
+
+  /**
+   * Builds the default graphql mock responses for a discussion query + mutation sequence.
+   * @param {object} opts
+   * @param {string[]} [opts.currentLabelIds] - IDs of labels currently on the discussion
+   * @param {string[]} [opts.currentLabelNames] - Names of labels currently on the discussion
+   * @param {Array<{id: string, name: string}>} [opts.repoLabels] - Labels available in the repo
+   */
+  function buildGraphqlMock({ currentLabelIds = [], currentLabelNames = [], repoLabels = [] } = {}) {
+    const currentLabels = currentLabelIds.map((id, i) => ({ id, name: currentLabelNames[i] ?? id }));
+
+    return vi.fn().mockImplementation(async query => {
+      // Fetch discussion node ID + current labels
+      if (query.includes("discussion(number:")) {
+        return {
+          repository: {
+            discussion: {
+              id: "D_disc123",
+              title: "Test Discussion",
+              body: "Test body",
+              url: "https://github.com/testowner/testrepo/discussions/42",
+              labels: { nodes: currentLabels },
+            },
+          },
+        };
+      }
+      // Update discussion title/body mutation
+      if (query.includes("updateDiscussion")) {
+        return {
+          updateDiscussion: {
+            discussion: {
+              id: "D_disc123",
+              title: "Test Discussion",
+              body: "Test body",
+              url: "https://github.com/testowner/testrepo/discussions/42",
+            },
+          },
+        };
+      }
+      // Fetch repository labels (for label ID lookup)
+      if (query.includes("labels(first:")) {
+        return {
+          repository: {
+            labels: { nodes: repoLabels },
+          },
+        };
+      }
+      // addLabelsToLabelable / removeLabelsFromLabelable mutations
+      if (query.includes("addLabelsToLabelable") || query.includes("removeLabelsFromLabelable")) {
+        return {};
+      }
+      return {};
+    });
+  }
+
+  describe("label updates", () => {
+    it("should add labels when discussion has no current labels", async () => {
+      mockGithub.graphql = buildGraphqlMock({
+        currentLabelIds: [],
+        currentLabelNames: [],
+        repoLabels: [
+          { id: "LA_bug", name: "bug" },
+          { id: "LA_idea", name: "idea" },
+        ],
+      });
+
+      const { main } = require("./update_discussion.cjs");
+      const handler = await main({ target: "triggering", max: 1 });
+      const result = await handler({ labels: ["bug"] }, {});
+
+      expect(result.success).toBe(true);
+
+      const addCall = mockGithub.graphql.mock.calls.find(c => c[0].includes("addLabelsToLabelable"));
+      expect(addCall).toBeDefined();
+      expect(addCall[1].labelIds).toEqual(["LA_bug"]);
+
+      const removeCall = mockGithub.graphql.mock.calls.find(c => c[0].includes("removeLabelsFromLabelable"));
+      expect(removeCall).toBeUndefined();
+    });
+
+    it("should remove labels no longer in the requested set", async () => {
+      mockGithub.graphql = buildGraphqlMock({
+        currentLabelIds: ["LA_bug", "LA_old"],
+        currentLabelNames: ["bug", "old-label"],
+        repoLabels: [
+          { id: "LA_bug", name: "bug" },
+          { id: "LA_idea", name: "idea" },
+        ],
+      });
+
+      const { main } = require("./update_discussion.cjs");
+      const handler = await main({ target: "triggering", max: 1 });
+      const result = await handler({ labels: ["bug"] }, {});
+
+      expect(result.success).toBe(true);
+
+      const removeCall = mockGithub.graphql.mock.calls.find(c => c[0].includes("removeLabelsFromLabelable"));
+      expect(removeCall).toBeDefined();
+      expect(removeCall[1].labelIds).toEqual(["LA_old"]);
+
+      const addCall = mockGithub.graphql.mock.calls.find(c => c[0].includes("addLabelsToLabelable"));
+      expect(addCall).toBeUndefined();
+    });
+
+    it("should replace all labels (add new, remove old)", async () => {
+      mockGithub.graphql = buildGraphqlMock({
+        currentLabelIds: ["LA_old"],
+        currentLabelNames: ["old-label"],
+        repoLabels: [
+          { id: "LA_bug", name: "bug" },
+          { id: "LA_idea", name: "idea" },
+        ],
+      });
+
+      const { main } = require("./update_discussion.cjs");
+      const handler = await main({ target: "triggering", max: 1 });
+      const result = await handler({ labels: ["bug", "idea"] }, {});
+
+      expect(result.success).toBe(true);
+
+      const addCall = mockGithub.graphql.mock.calls.find(c => c[0].includes("addLabelsToLabelable"));
+      expect(addCall).toBeDefined();
+      expect(addCall[1].labelIds).toEqual(expect.arrayContaining(["LA_bug", "LA_idea"]));
+
+      const removeCall = mockGithub.graphql.mock.calls.find(c => c[0].includes("removeLabelsFromLabelable"));
+      expect(removeCall).toBeDefined();
+      expect(removeCall[1].labelIds).toEqual(["LA_old"]);
+    });
+
+    it("should do nothing when requested labels are unchanged", async () => {
+      mockGithub.graphql = buildGraphqlMock({
+        currentLabelIds: ["LA_bug"],
+        currentLabelNames: ["bug"],
+        repoLabels: [{ id: "LA_bug", name: "bug" }],
+      });
+
+      const { main } = require("./update_discussion.cjs");
+      const handler = await main({ target: "triggering", max: 1 });
+      const result = await handler({ labels: ["bug"] }, {});
+
+      expect(result.success).toBe(true);
+
+      const addCall = mockGithub.graphql.mock.calls.find(c => c[0].includes("addLabelsToLabelable"));
+      expect(addCall).toBeUndefined();
+
+      const removeCall = mockGithub.graphql.mock.calls.find(c => c[0].includes("removeLabelsFromLabelable"));
+      expect(removeCall).toBeUndefined();
+    });
+
+    it("should filter labels against allowed_labels list", async () => {
+      mockGithub.graphql = buildGraphqlMock({
+        currentLabelIds: [],
+        currentLabelNames: [],
+        repoLabels: [
+          { id: "LA_bug", name: "bug" },
+          { id: "LA_idea", name: "idea" },
+          { id: "LA_other", name: "other" },
+        ],
+      });
+
+      const { main } = require("./update_discussion.cjs");
+      const handler = await main({
+        target: "triggering",
+        max: 1,
+        allowed_labels: ["bug", "idea"],
+      });
+      // "other" is not in allowed_labels and should be filtered out
+      const result = await handler({ labels: ["bug", "other"] }, {});
+
+      expect(result.success).toBe(true);
+
+      const addCall = mockGithub.graphql.mock.calls.find(c => c[0].includes("addLabelsToLabelable"));
+      expect(addCall).toBeDefined();
+      // Only "bug" should be added since "other" is not in allowed_labels
+      expect(addCall[1].labelIds).toEqual(["LA_bug"]);
+    });
+
+    it("should update labels regardless of allow_labels config (consistent with update_issue)", async () => {
+      mockGithub.graphql = buildGraphqlMock({
+        currentLabelIds: [],
+        currentLabelNames: [],
+        repoLabels: [{ id: "LA_bug", name: "bug" }],
+      });
+
+      const { main } = require("./update_discussion.cjs");
+      // No allow_labels in config - labels are still processed (consistent with update_issue behavior)
+      const handler = await main({ target: "triggering", max: 1 });
+      const result = await handler({ labels: ["bug"] }, {});
+
+      expect(result.success).toBe(true);
+      // Labels should be updated even without explicit allow_labels flag
+      const addCall = mockGithub.graphql.mock.calls.find(c => c[0].includes("addLabelsToLabelable"));
+      expect(addCall).toBeDefined();
+      expect(addCall[1].labelIds).toEqual(["LA_bug"]);
+    });
+
+    it("should update labels in combination with title", async () => {
+      mockGithub.graphql = buildGraphqlMock({
+        currentLabelIds: [],
+        currentLabelNames: [],
+        repoLabels: [{ id: "LA_bug", name: "bug" }],
+      });
+
+      const { main } = require("./update_discussion.cjs");
+      const handler = await main({ target: "triggering", max: 1 });
+      const result = await handler({ title: "New Title", labels: ["bug"] }, {});
+
+      expect(result.success).toBe(true);
+
+      const updateCall = mockGithub.graphql.mock.calls.find(c => c[0].includes("updateDiscussion"));
+      expect(updateCall).toBeDefined();
+
+      const addCall = mockGithub.graphql.mock.calls.find(c => c[0].includes("addLabelsToLabelable"));
+      expect(addCall).toBeDefined();
+      expect(addCall[1].labelIds).toEqual(["LA_bug"]);
+    });
+  });
+
+  describe("label-only updates (no title/body)", () => {
+    it("should update only labels without touching title or body", async () => {
+      mockGithub.graphql = buildGraphqlMock({
+        currentLabelIds: [],
+        currentLabelNames: [],
+        repoLabels: [{ id: "LA_idea", name: "idea" }],
+      });
+
+      const { main } = require("./update_discussion.cjs");
+      const handler = await main({ target: "triggering", max: 1 });
+      const result = await handler({ labels: ["idea"] }, {});
+
+      expect(result.success).toBe(true);
+
+      // updateDiscussion mutation should NOT be called (no title/body update)
+      const updateCall = mockGithub.graphql.mock.calls.find(c => c[0].includes("updateDiscussion"));
+      expect(updateCall).toBeUndefined();
+
+      // addLabelsToLabelable should be called
+      const addCall = mockGithub.graphql.mock.calls.find(c => c[0].includes("addLabelsToLabelable"));
+      expect(addCall).toBeDefined();
+    });
+  });
+});
diff --git a/pkg/workflow/safe_outputs_validation_config.go b/pkg/workflow/safe_outputs_validation_config.go
index 30342a63a44..f7fd81e4094 100644
--- a/pkg/workflow/safe_outputs_validation_config.go
+++ b/pkg/workflow/safe_outputs_validation_config.go
@@ -318,10 +318,11 @@ var ValidationConfig = map[string]TypeValidationConfig{
 	},
 	"update_discussion": {
 		DefaultMax:       1,
-		CustomValidation: "requiresOneOf:title,body",
+		CustomValidation: "requiresOneOf:title,body,labels",
 		Fields: map[string]FieldValidation{
 			"title":             {Type: "string", Sanitize: true, MaxLength: 128},
 			"body":              {Type: "string", Sanitize: true, MaxLength: MaxBodyLength},
+			"labels":            {Type: "array", ItemType: "string", ItemSanitize: true, ItemMaxLength: 128},
 			"discussion_number": {IssueOrPRNumber: true},
 			"repo":              {Type: "string", MaxLength: 256}, // Optional: target repository in format "owner/repo"
 		},