Merge branch 'feature/group-level-labels' into 'master'

Add group level labels

## What does this MR do?

Add group level labels.

## Are there points in the code the reviewer needs to double check?

* `LabelsFinder`
* `Gitlab::Gfm::ReferenceRewriter`
* `Banzai::Filter::LabelReferenceFilter`

## Why was this MR needed?

We'll be adding more feature that allow you to do cross-project management of issues.

## Screenshots (if relevant)

* Group Labels
    ![Group Labels](/uploads/2244c06ad68eae4fb246fb4c81bf8060/2.png)

* Project Labels
    ![Project Labels](/uploads/c5839516d2282b51f7418d9dadbeceb4/1.png)

* Expanded references for group labels when moving issue to another project
    ![Expanded references for group labels when moving issue to another project](/uploads/0c9ab248a8420d4978d59349ae3d42e5/3.png)

## Does this MR meet the acceptance criteria?

- [x] [CHANGELOG](https://gitlab.com/gitlab-org/gitlab-ce/blob/master/CHANGELOG) entry added
- [ ] [Documentation created/updated](https://gitlab.com/gitlab-org/gitlab-ce/blob/master/doc/development/doc_styleguide.md)
- [x] API support added
- Tests
  - [x] Added for this feature/bug
  - [ ] All builds are passing
- [ ] Conform by the [merge request performance guides](http://docs.gitlab.com/ce/development/merge_request_performance_guidelines.html)
- [x] Conform by the [style guides](https://gitlab.com/gitlab-org/gitlab-ce/blob/master/CONTRIBUTING.md#style-guides)
- [ ] Branch has no merge conflicts with `master` (if you do - rebase it please)
- [x] [Squashed related commits together](https://git-scm.com/book/en/Git-Tools-Rewriting-History#Squashing-Commits)

## What are the relevant issue numbers?

#19997

See merge request !6425

116 files changed, 1991 insertions, 450 deletions

diff --git a/CHANGELOG.md b/CHANGELOG.md
index e185d030ed5..527fba9ddad 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -21,6 +21,7 @@ Please view this file on the master branch, on stable branches it's out of date.
   - Fix centering of custom header logos (Ashley Dumaine)
   - Keep around commits only pipeline creation as pipeline data doesn't change over time
   - ExpireBuildArtifactsWorker query builds table without ordering enqueuing one job per build to cleanup
+  - Add group level labels. (!6425)
   - Add an example for testing a phoenix application with Gitlab CI in the docs (Manthan Mallikarjun)
   - Cancelled pipelines could be retried. !6927
   - Updating verbiage on git basics to be more intuitive
diff --git a/app/assets/javascripts/dispatcher.js.es6 b/app/assets/javascripts/dispatcher.js.es6
index 73691f40c74..afc0d6f8c62 100644
--- a/app/assets/javascripts/dispatcher.js.es6
+++ b/app/assets/javascripts/dispatcher.js.es6
@@ -168,6 +168,8 @@
           shortcut_handler = new ShortcutsNavigation();
           new ShortcutsBlob(true);
           break;
+        case 'groups:labels:new':
+        case 'groups:labels:edit':
         case 'projects:labels:new':
         case 'projects:labels:edit':
           new Labels();
diff --git a/app/assets/stylesheets/pages/labels.scss b/app/assets/stylesheets/pages/labels.scss
index 9bac6d46355..397f89f501a 100644
--- a/app/assets/stylesheets/pages/labels.scss
+++ b/app/assets/stylesheets/pages/labels.scss
@@ -66,7 +66,21 @@
       text-overflow: ellipsis;
       vertical-align: middle;
       max-width: 100%;
-    }    
+    }
+  }
+
+  .label-type {
+    display: block;
+    margin-bottom: 10px;
+    margin-left: 50px;
+
+    @media (min-width: $screen-sm-min) {
+      display: inline-block;
+      width: 100px;
+      margin-left: 10px;
+      margin-bottom: 0;
+      vertical-align: middle;
+    }
   }
 
   .label-description {
@@ -209,6 +223,13 @@
 }
 
 .label-subscribe-button {
+  .label-subscribe-button-icon {
+    &[disabled] {
+      opacity: 0.5;
+      pointer-events: none;
+    }
+  }
+
   .label-subscribe-button-loading {
     display: none;
   }
diff --git a/app/controllers/concerns/issuable_actions.rb b/app/controllers/concerns/issuable_actions.rb
index bb32bc502e6..be86fa106f8 100644
--- a/app/controllers/concerns/issuable_actions.rb
+++ b/app/controllers/concerns/issuable_actions.rb
@@ -2,6 +2,7 @@ module IssuableActions
   extend ActiveSupport::Concern
 
   included do
+    before_action :labels, only: [:show, :new, :edit]
     before_action :authorize_destroy_issuable!, only: :destroy
     before_action :authorize_admin_issuable!, only: :bulk_update
   end
@@ -25,6 +26,10 @@ module IssuableActions
 
   private
 
+  def labels
+    @labels ||= LabelsFinder.new(current_user, project_id: @project.id).execute
+  end
+
   def authorize_destroy_issuable!
     unless can?(current_user, :"destroy_#{issuable.to_ability_name}", issuable)
       return access_denied!
diff --git a/app/controllers/dashboard/labels_controller.rb b/app/controllers/dashboard/labels_controller.rb
index 2a88350a4ca..d5031da867a 100644
--- a/app/controllers/dashboard/labels_controller.rb
+++ b/app/controllers/dashboard/labels_controller.rb
@@ -1,9 +1,9 @@
 class Dashboard::LabelsController < Dashboard::ApplicationController
   def index
-    labels = Label.where(project_id: projects).select(:id, :title, :color).uniq(:title)
+    labels = LabelsFinder.new(current_user).execute
 
     respond_to do |format|
-      format.json { render json: labels }
+      format.json { render json: labels.as_json(only: [:id, :title, :color]) }
     end
   end
 end
diff --git a/app/controllers/groups/labels_controller.rb b/app/controllers/groups/labels_controller.rb
new file mode 100644
index 00000000000..29528b2cfaa
--- /dev/null
+++ b/app/controllers/groups/labels_controller.rb
@@ -0,0 +1,92 @@
+class Groups::LabelsController < Groups::ApplicationController
+  before_action :label, only: [:edit, :update, :destroy]
+  before_action :authorize_admin_labels!, only: [:new, :create, :edit, :update, :destroy]
+  before_action :save_previous_label_path, only: [:edit]
+
+  respond_to :html
+
+  def index
+    respond_to do |format|
+      format.html do
+        @labels = @group.labels.page(params[:page])
+      end
+
+      format.json do
+        available_labels = LabelsFinder.new(current_user, group_id: @group.id).execute
+        render json: available_labels.as_json(only: [:id, :title, :color])
+      end
+    end
+  end
+
+  def new
+    @label = @group.labels.new
+    @previous_labels_path = previous_labels_path
+  end
+
+  def create
+    @label = @group.labels.create(label_params)
+
+    if @label.valid?
+      redirect_to group_labels_path(@group)
+    else
+      render :new
+    end
+  end
+
+  def edit
+    @previous_labels_path = previous_labels_path
+  end
+
+  def update
+    if @label.update_attributes(label_params)
+      redirect_back_or_group_labels_path
+    else
+      render :edit
+    end
+  end
+
+  def destroy
+    @label.destroy
+
+    respond_to do |format|
+      format.html do
+        redirect_to group_labels_path(@group), notice: 'Label was removed'
+      end
+      format.js
+    end
+  end
+
+  protected
+
+  def authorize_admin_labels!
+    return render_404 unless can?(current_user, :admin_label, @group)
+  end
+
+  def authorize_read_labels!
+    return render_404 unless can?(current_user, :read_label, @group)
+  end
+
+  def label
+    @label ||= @group.labels.find(params[:id])
+  end
+
+  def label_params
+    params.require(:label).permit(:title, :description, :color)
+  end
+
+  def redirect_back_or_group_labels_path(options = {})
+    redirect_to previous_labels_path, options
+  end
+
+  def previous_labels_path
+    session.fetch(:previous_labels_path, fallback_path)
+  end
+
+  def fallback_path
+    group_labels_path(@group)
+  end
+
+  def save_previous_label_path
+    session[:previous_labels_path] = URI(request.referer || '').path
+  end
+end
diff --git a/app/controllers/projects/boards/issues_controller.rb b/app/controllers/projects/boards/issues_controller.rb
index 71eb56aed0b..a2b01ff43dc 100644
--- a/app/controllers/projects/boards/issues_controller.rb
+++ b/app/controllers/projects/boards/issues_controller.rb
@@ -72,10 +72,10 @@ module Projects
 
       def serialize_as_json(resource)
         resource.as_json(
+          labels: true,
           only: [:iid, :title, :confidential],
           include: {
-            assignee: { only: [:id, :name, :username], methods: [:avatar_url] },
-            labels:   { only: [:id, :title, :description, :color, :priority], methods: [:text_color] }
+            assignee: { only: [:id, :name, :username], methods: [:avatar_url] }
           })
       end
     end
diff --git a/app/controllers/projects/boards/lists_controller.rb b/app/controllers/projects/boards/lists_controller.rb
index 76ae41319c4..67e3c9add81 100644
--- a/app/controllers/projects/boards/lists_controller.rb
+++ b/app/controllers/projects/boards/lists_controller.rb
@@ -76,9 +76,8 @@ module Projects
         resource.as_json(
           only: [:id, :list_type, :position],
           methods: [:title],
-          include: {
-            label: { only: [:id, :title, :description, :color, :priority] }
-          })
+          label: true
+        )
       end
     end
   end
diff --git a/app/controllers/projects/issues_controller.rb b/app/controllers/projects/issues_controller.rb
index 96041b07647..cb649264146 100644
--- a/app/controllers/projects/issues_controller.rb
+++ b/app/controllers/projects/issues_controller.rb
@@ -26,7 +26,9 @@ class Projects::IssuesController < Projects::ApplicationController
     @issues = issues_collection
     @issues = @issues.page(params[:page])
 
-    @labels = @project.labels.where(title: params[:label_name])
+    if params[:label_name].present?
+      @labels = LabelsFinder.new(current_user, project_id: @project.id, title: params[:label_name]).execute
+    end
 
     respond_to do |format|
       format.html
diff --git a/app/controllers/projects/labels_controller.rb b/app/controllers/projects/labels_controller.rb
index a6626df4826..4f855134368 100644
--- a/app/controllers/projects/labels_controller.rb
+++ b/app/controllers/projects/labels_controller.rb
@@ -3,21 +3,22 @@ class Projects::LabelsController < Projects::ApplicationController
 
   before_action :module_enabled
   before_action :label, only: [:edit, :update, :destroy]
+  before_action :find_labels, only: [:index, :set_priorities, :remove_priority]
   before_action :authorize_read_label!
-  before_action :authorize_admin_labels!, only: [
-    :new, :create, :edit, :update, :generate, :destroy, :remove_priority, :set_priorities
-  ]
+  before_action :authorize_admin_labels!, only: [:new, :create, :edit, :update,
+                                                 :generate, :destroy, :remove_priority,
+                                                 :set_priorities]
 
   respond_to :js, :html
 
   def index
-    @labels = @project.labels.unprioritized.page(params[:page])
-    @prioritized_labels = @project.labels.prioritized
+    @prioritized_labels = @available_labels.prioritized(@project)
+    @labels = @available_labels.unprioritized(@project).page(params[:page])
 
     respond_to do |format|
       format.html
       format.json do
-        render json: @project.labels
+        render json: @available_labels.as_json(only: [:id, :title, :color])
       end
     end
   end
@@ -36,7 +37,7 @@ class Projects::LabelsController < Projects::ApplicationController
       end
     else
       respond_to do |format|
-        format.html { render 'new' }
+        format.html { render :new }
         format.json { render json: { message: @label.errors.messages }, status: 400 }
       end
     end
@@ -49,7 +50,7 @@ class Projects::LabelsController < Projects::ApplicationController
     if @label.update_attributes(label_params)
       redirect_to namespace_project_labels_path(@project.namespace, @project)
     else
-      render 'edit'
+      render :edit
     end
   end
 
@@ -68,6 +69,7 @@ class Projects::LabelsController < Projects::ApplicationController
 
   def destroy
     @label.destroy
+    @labels = find_labels
 
     respond_to do |format|
       format.html do
@@ -80,20 +82,24 @@ class Projects::LabelsController < Projects::ApplicationController
 
   def remove_priority
     respond_to do |format|
-      if label.update_attribute(:priority, nil)
+      label = @available_labels.find(params[:id])
+
+      if label.unprioritize!(project)
         format.json { render json: label }
       else
-        message = label.errors.full_messages.uniq.join('. ')
-        format.json { render json: { message: message }, status: :unprocessable_entity }
+        format.json { head :unprocessable_entity }
       end
     end
   end
 
   def set_priorities
     Label.transaction do
-      params[:label_ids].each_with_index do |label_id, index|
-        label = @project.labels.find_by_id(label_id)
-        label.update_attribute(:priority, index) if label
+      available_labels_ids = @available_labels.where(id: params[:label_ids]).pluck(:id)
+      label_ids = params[:label_ids].select { |id| available_labels_ids.include?(id.to_i) }
+
+      label_ids.each_with_index do |label_id, index|
+        label = @available_labels.find(label_id)
+        label.prioritize!(project, index)
       end
     end
 
@@ -119,6 +125,10 @@ class Projects::LabelsController < Projects::ApplicationController
   end
   alias_method :subscribable_resource, :label
 
+  def find_labels
+    @available_labels ||= LabelsFinder.new(current_user, project_id: @project.id).execute.includes(:priorities)
+  end
+
   def authorize_admin_labels!
     return render_404 unless can?(current_user, :admin_label, @project)
   end
diff --git a/app/controllers/projects/merge_requests_controller.rb b/app/controllers/projects/merge_requests_controller.rb
index 04386258c19..0f593d1a936 100644
--- a/app/controllers/projects/merge_requests_controller.rb
+++ b/app/controllers/projects/merge_requests_controller.rb
@@ -40,7 +40,10 @@ class Projects::MergeRequestsController < Projects::ApplicationController
     @merge_requests = @merge_requests.page(params[:page])
     @merge_requests = @merge_requests.preload(:target_project)
 
-    @labels = @project.labels.where(title: params[:label_name])
+    if params[:label_name].present?
+      labels_params = { project_id: @project.id, title: params[:label_name] }
+      @labels = LabelsFinder.new(current_user, labels_params).execute
+    end
 
     respond_to do |format|
       format.html
@@ -575,6 +578,8 @@ class Projects::MergeRequestsController < Projects::ApplicationController
     @note_counts = Note.where(commit_id: @commits.map(&:id)).
       group(:commit_id).count
 
+    @labels = LabelsFinder.new(current_user, project_id: @project.id).execute
+
     define_pipelines_vars
   end
 
diff --git a/app/finders/issuable_finder.rb b/app/finders/issuable_finder.rb
index 9f170428100..e27986ef95b 100644
--- a/app/finders/issuable_finder.rb
+++ b/app/finders/issuable_finder.rb
@@ -124,15 +124,12 @@ class IssuableFinder
   def labels
     return @labels if defined?(@labels)
 
-    if labels? && !filter_by_no_label?
-      @labels = Label.where(title: label_names)
-
-      if projects
-        @labels = @labels.where(project: projects)
+    @labels =
+      if labels? && !filter_by_no_label?
+        LabelsFinder.new(current_user, project_ids: projects, title: label_names).execute
+      else
+        Label.none
       end
-    else
-      @labels = Label.none
-    end
   end
 
   def assignee?
@@ -274,8 +271,10 @@ class IssuableFinder
         items = items.without_label
       else
         items = items.with_label(label_names, params[:sort])
+
         if projects
-          items = items.where(labels: { project_id: projects })
+          label_ids = LabelsFinder.new(current_user, project_ids: projects).execute.select(:id)
+          items = items.where(labels: { id: label_ids })
         end
       end
     end
diff --git a/app/finders/labels_finder.rb b/app/finders/labels_finder.rb
new file mode 100644
index 00000000000..6ace14a4bb5
--- /dev/null
+++ b/app/finders/labels_finder.rb
@@ -0,0 +1,92 @@
+class LabelsFinder < UnionFinder
+  def initialize(current_user, params = {})
+    @current_user = current_user
+    @params = params
+  end
+
+  def execute(authorized_only: true)
+    @authorized_only = authorized_only
+
+    items = find_union(label_ids, Label)
+    items = with_title(items)
+    sort(items)
+  end
+
+  private
+
+  attr_reader :current_user, :params, :authorized_only
+
+  def label_ids
+    label_ids = []
+
+    if project
+      label_ids << project.group.labels if project.group.present?
+      label_ids << project.labels
+    else
+      label_ids << Label.where(group_id: projects.group_ids)
+      label_ids << Label.where(project_id: projects.select(:id))
+    end
+
+    label_ids
+  end
+
+  def sort(items)
+    items.reorder(title: :asc)
+  end
+
+  def with_title(items)
+    items = items.where(title: title) if title
+    items
+  end
+
+  def group_id
+    params[:group_id].presence
+  end
+
+  def project_id
+    params[:project_id].presence
+  end
+
+  def projects_ids
+    params[:project_ids].presence
+  end
+
+  def title
+    params[:title].presence || params[:name].presence
+  end
+
+  def project
+    return @project if defined?(@project)
+
+    if project_id
+      @project = find_project
+    else
+      @project = nil
+    end
+
+    @project
+  end
+
+  def find_project
+    if authorized_only
+      available_projects.find_by(id: project_id)
+    else
+      Project.find_by(id: project_id)
+    end
+  end
+
+  def projects
+    return @projects if defined?(@projects)
+
+    @projects = authorized_only ? available_projects : Project.all
+    @projects = @projects.in_namespace(group_id) if group_id
+    @projects = @projects.where(id: projects_ids) if projects_ids
+    @projects = @projects.reorder(nil)
+
+    @projects
+  end
+
+  def available_projects
+    @available_projects ||= ProjectsFinder.new.execute(current_user)
+  end
+end
diff --git a/app/helpers/labels_helper.rb b/app/helpers/labels_helper.rb
index b9f3d6c75c2..221a84b042f 100644
--- a/app/helpers/labels_helper.rb
+++ b/app/helpers/labels_helper.rb
@@ -4,9 +4,8 @@ module LabelsHelper
   # Link to a Label
   #
   # label   - Label object to link to
-  # project - Project object which will be used as the context for the label's
-  #           link. If omitted, defaults to `@project`, or the label's own
-  #           project.
+  # subject - Project/Group object which will be used as the context for the
+  #           label's link. If omitted, defaults to the label's own group/project.
   # type    - The type of item the link will point to (:issue or
   #           :merge_request). If omitted, defaults to :issue.
   # block   - An optional block that will be passed to `link_to`, forming the
@@ -15,15 +14,14 @@ module LabelsHelper
   #
   # Examples:
   #
-  #   # Allow the generated link to use the label's own project
+  #   # Allow the generated link to use the label's own subject
   #   link_to_label(label)
   #
-  #   # Force the generated link to use @project
-  #   @project = Project.first
-  #   link_to_label(label)
+  #   # Force the generated link to use a provided group
+  #   link_to_label(label, subject: Group.last)
   #
   #   # Force the generated link to use a provided project
-  #   link_to_label(label, project: Project.last)
+  #   link_to_label(label, subject: Project.last)
   #
   #   # Force the generated link to point to merge requests instead of issues
   #   link_to_label(label, type: :merge_request)
@@ -32,9 +30,8 @@ module LabelsHelper
   #   link_to_label(label) { "My Custom Label Text" }
   #
   # Returns a String
-  def link_to_label(label, project: nil, type: :issue, tooltip: true, css_class: nil, &block)
-    project ||= @project || label.project
-    link = label_filter_path(project, label, type: type)
+  def link_to_label(label, subject: nil, type: :issue, tooltip: true, css_class: nil, &block)
+    link = label_filter_path(subject || label.subject, label, type: type)
 
     if block_given?
       link_to link, class: css_class, &block
@@ -43,15 +40,40 @@ module LabelsHelper
     end
   end
 
-  def label_filter_path(project, label, type: issue)
-    send("namespace_project_#{type.to_s.pluralize}_path",
-                project.namespace,
-                project,
-                label_name: [label.name])
+  def label_filter_path(subject, label, type: :issue)
+    case subject
+    when Group
+      send("#{type.to_s.pluralize}_group_path",
+                  subject,
+                  label_name: [label.name])
+    when Project
+      send("namespace_project_#{type.to_s.pluralize}_path",
+                  subject.namespace,
+                  subject,
+                  label_name: [label.name])
+    end
+  end
+
+  def edit_label_path(label)
+    case label
+    when GroupLabel then edit_group_label_path(label.group, label)
+    when ProjectLabel then edit_namespace_project_label_path(label.project.namespace, label.project, label)
+    end
+  end
+
+  def destroy_label_path(label)
+    case label
+    when GroupLabel then group_label_path(label.group, label)
+    when ProjectLabel then namespace_project_label_path(label.project.namespace, label.project, label)
+    end
   end
 
-  def project_label_names
-    @project.labels.pluck(:title)
+  def toggle_subscription_data(label)
+    return unless label.is_a?(ProjectLabel)
+
+    {
+      url: toggle_subscription_namespace_project_label_path(label.project.namespace, label.project, label)
+    }
   end
 
   def render_colored_label(label, label_suffix = '', tooltip: true)
@@ -68,8 +90,8 @@ module LabelsHelper
     span.html_safe
   end
 
-  def render_colored_cross_project_label(label, tooltip: true)
-    label_suffix = label.project.name_with_namespace
+  def render_colored_cross_project_label(label, source_project = nil, tooltip: true)
+    label_suffix = source_project ? source_project.name_with_namespace : label.project.name_with_namespace
     label_suffix = " <i>in #{escape_once(label_suffix)}</i>"
     render_colored_label(label, label_suffix, tooltip: tooltip)
   end
@@ -115,7 +137,10 @@ module LabelsHelper
   end
 
   def labels_filter_path
+    return group_labels_path(@group, :json) if @group
+
     project = @target_project || @project
+
     if project
       namespace_project_labels_path(project.namespace, project, :json)
     else
@@ -124,11 +149,24 @@ module LabelsHelper
   end
 
   def label_subscription_status(label)
-    label.subscribed?(current_user) ? 'subscribed' : 'unsubscribed'
+    case label
+    when GroupLabel then 'Subscribing to group labels is currently not supported.'
+    when ProjectLabel then label.subscribed?(current_user) ? 'subscribed' : 'unsubscribed'
+    end
   end
 
   def label_subscription_toggle_button_text(label)
-    label.subscribed?(current_user) ? 'Unsubscribe' : 'Subscribe'
+    case label
+    when GroupLabel then 'Subscribing to group labels is currently not supported.'
+    when ProjectLabel then label.subscribed?(current_user) ? 'Unsubscribe' : 'Subscribe'
+    end
+  end
+
+  def label_deletion_confirm_text(label)
+    case label
+    when GroupLabel then 'Remove this label? This will affect all projects within the group. Are you sure?'
+    when ProjectLabel then 'Remove this label? Are you sure?'
+    end
   end
 
   # Required for Banzai::Filter::LabelReferenceFilter
diff --git a/app/models/concerns/issuable.rb b/app/models/concerns/issuable.rb
index c4b42ad82c7..17c3b526c97 100644
--- a/app/models/concerns/issuable.rb
+++ b/app/models/concerns/issuable.rb
@@ -145,8 +145,14 @@ module Issuable
     end
 
     def order_labels_priority(excluded_labels: [])
-      condition_field = "#{table_name}.id"
-      highest_priority = highest_label_priority(name, condition_field, excluded_labels: excluded_labels).to_sql
+      params = {
+        target_type: name,
+        target_column: "#{table_name}.id",
+        project_column: "#{table_name}.#{project_foreign_key}",
+        excluded_labels: excluded_labels
+      }
+
+      highest_priority = highest_label_priority(params).to_sql
 
       select("#{table_name}.*, (#{highest_priority}) AS highest_priority").
         group(arel_table[:id]).
@@ -230,18 +236,6 @@ module Issuable
     labels.order('title ASC').pluck(:title)
   end
 
-  def remove_labels
-    labels.delete_all
-  end
-
-  def add_labels_by_names(label_names)
-    label_names.each do |label_name|
-      label = project.labels.create_with(color: Label::DEFAULT_COLOR).
-        find_or_create_by(title: label_name.strip)
-      self.labels << label
-    end
-  end
-
   # Convert this Issuable class name to a format usable by Ability definitions
   #
   # Examples:
diff --git a/app/models/concerns/sortable.rb b/app/models/concerns/sortable.rb
index 1ebecd86af9..12b23f00769 100644
--- a/app/models/concerns/sortable.rb
+++ b/app/models/concerns/sortable.rb
@@ -38,11 +38,13 @@ module Sortable
 
     private
 
-    def highest_label_priority(object_types, condition_field, excluded_labels: [])
-      query = Label.select(Label.arel_table[:priority].minimum).
+    def highest_label_priority(target_type:, target_column:, project_column:, excluded_labels: [])
+      query = Label.select(LabelPriority.arel_table[:priority].minimum).
+        left_join_priorities.
         joins(:label_links).
-        where(label_links: { target_type: object_types }).
-        where("label_links.target_id = #{condition_field}").
+        where("label_priorities.project_id = #{project_column}").
+        where(label_links: { target_type: target_type }).
+        where("label_links.target_id = #{target_column}").
         reorder(nil)
 
       query.where.not(title: excluded_labels) if excluded_labels.present?
diff --git a/app/models/group.rb b/app/models/group.rb
index a2f88cca828..00a595d2705 100644
--- a/app/models/group.rb
+++ b/app/models/group.rb
@@ -19,6 +19,7 @@ class Group < Namespace
   has_many :project_group_links, dependent: :destroy
   has_many :shared_projects, through: :project_group_links, source: :project
   has_many :notification_settings, dependent: :destroy, as: :source
+  has_many :labels, class_name: 'GroupLabel'
 
   validate :avatar_type, if: ->(user) { user.avatar.present? && user.avatar_changed? }
   validate :visibility_level_allowed_by_projects
diff --git a/app/models/group_label.rb b/app/models/group_label.rb
new file mode 100644
index 00000000000..a698b532d19
--- /dev/null
+++ b/app/models/group_label.rb
@@ -0,0 +1,11 @@
+class GroupLabel < Label
+  belongs_to :group
+
+  validates :group, presence: true
+
+  alias_attribute :subject, :group
+
+  def to_reference(source_project = nil, target_project = nil, format: :id)
+    super(source_project, target_project, format: format)
+  end
+end
diff --git a/app/models/issue.rb b/app/models/issue.rb
index abd58e0454a..133a5993815 100644
--- a/app/models/issue.rb
+++ b/app/models/issue.rb
@@ -138,6 +138,10 @@ class Issue < ActiveRecord::Base
     reference.to_i > 0 && reference.to_i <= Gitlab::Database::MAX_INT_VALUE
   end
 
+  def self.project_foreign_key
+    'project_id'
+  end
+
   def self.sort(method, excluded_labels: [])
     case method.to_s
     when 'due_date_asc' then order_due_date_asc
@@ -274,4 +278,16 @@ class Issue < ActiveRecord::Base
   def check_for_spam?
     project.public?
   end
+
+  def as_json(options = {})
+    super(options).tap do |json|
+      if options.has_key?(:labels)
+        json[:labels] = labels.as_json(
+          project: project,
+          only: [:id, :title, :description, :color],
+          methods: [:text_color]
+        )
+      end
+    end
+  end
 end
diff --git a/app/models/label.rb b/app/models/label.rb
index e8e12e2904e..149fd98ecb3 100644
--- a/app/models/label.rb
+++ b/app/models/label.rb
@@ -15,34 +15,49 @@ class Label < ActiveRecord::Base
 
   default_value_for :color, DEFAULT_COLOR
 
-  belongs_to :project
-
   has_many :lists, dependent: :destroy
+  has_many :priorities, class_name: 'LabelPriority'
   has_many :label_links, dependent: :destroy
   has_many :issues, through: :label_links, source: :target, source_type: 'Issue'
   has_many :merge_requests, through: :label_links, source: :target, source_type: 'MergeRequest'
 
   validates :color, color: true, allow_blank: false
-  validates :project, presence: true, unless: Proc.new { |service| service.template? }
 
   # Don't allow ',' for label titles
-  validates :title,
-            presence: true,
-            format: { with: /\A[^,]+\z/ },
-            uniqueness: { scope: :project_id }
-
-  before_save :nullify_priority
+  validates :title, presence: true, format: { with: /\A[^,]+\z/ }
+  validates :title, uniqueness: { scope: [:group_id, :project_id] }
 
   default_scope { order(title: :asc) }
 
-  scope :templates, ->  { where(template: true) }
+  scope :templates, -> { where(template: true) }
+  scope :with_title, ->(title) { where(title: title) }
+
+  def self.prioritized(project)
+    joins(:priorities)
+      .where(label_priorities: { project_id: project })
+      .reorder('label_priorities.priority ASC, labels.title ASC')
+  end
+
+  def self.unprioritized(project)
+    labels = Label.arel_table
+    priorities = LabelPriority.arel_table
+
+    label_priorities = labels.join(priorities, Arel::Nodes::OuterJoin).
+                              on(labels[:id].eq(priorities[:label_id]).and(priorities[:project_id].eq(project.id))).
+                              join_sources
 
-  def self.prioritized
-    where.not(priority: nil).reorder(:priority, :title)
+    joins(label_priorities).where(priorities[:priority].eq(nil))
   end
 
-  def self.unprioritized
-    where(priority: nil)
+  def self.left_join_priorities
+    labels = Label.arel_table
+    priorities = LabelPriority.arel_table
+
+    label_priorities = labels.join(priorities, Arel::Nodes::OuterJoin).
+                              on(labels[:id].eq(priorities[:label_id])).
+                              join_sources
+
+    joins(label_priorities)
   end
 
   alias_attribute :name, :title
@@ -77,6 +92,44 @@ class Label < ActiveRecord::Base
     nil
   end
 
+  def open_issues_count(user = nil, project = nil)
+    issues_count(user, project_id: project.try(:id) || project_id, state: 'opened')
+  end
+
+  def closed_issues_count(user = nil, project = nil)
+    issues_count(user, project_id: project.try(:id) || project_id, state: 'closed')
+  end
+
+  def open_merge_requests_count(user = nil, project = nil)
+    merge_requests_count(user, project_id: project.try(:id) || project_id, state: 'opened')
+  end
+
+  def prioritize!(project, value)
+    label_priority = priorities.find_or_initialize_by(project_id: project.id)
+    label_priority.priority = value
+    label_priority.save!
+  end
+
+  def unprioritize!(project)
+    priorities.where(project: project).delete_all
+  end
+
+  def priority(project)
+    priorities.find_by(project: project).try(:priority)
+  end
+
+  def template?
+    template
+  end
+
+  def text_color
+    LabelsHelper.text_color_for_bg(self.color)
+  end
+
+  def title=(value)
+    write_attribute(:title, sanitize_title(value)) if value.present?
+  end
+
   ##
   # Returns the String necessary to reference this Label in Markdown
   #
@@ -84,49 +137,47 @@ class Label < ActiveRecord::Base
   #
   # Examples:
   #
-  #   Label.first.to_reference                # => "~1"
-  #   Label.first.to_reference(format: :name) # => "~\"bug\""
-  #   Label.first.to_reference(project)       # => "gitlab-org/gitlab-ce~1"
+  #   Label.first.to_reference                     # => "~1"
+  #   Label.first.to_reference(format: :name)      # => "~\"bug\""
+  #   Label.first.to_reference(project1, project2) # => "gitlab-org/gitlab-ce~1"
   #
   # Returns a String
   #
-  def to_reference(from_project = nil, format: :id)
+  def to_reference(source_project = nil, target_project = nil, format: :id)
     format_reference = label_format_reference(format)
     reference = "#{self.class.reference_prefix}#{format_reference}"
 
-    if cross_project_reference?(from_project)
-      project.to_reference + reference
+    if cross_project_reference?(source_project, target_project)
+      source_project.to_reference + reference
     else
       reference
     end
   end
 
-  def open_issues_count(user = nil)
-    issues.visible_to_user(user).opened.count
-  end
-
-  def closed_issues_count(user = nil)
-    issues.visible_to_user(user).closed.count
+  def as_json(options = {})
+    super(options).tap do |json|
+      json[:priority] = priority(options[:project]) if options.has_key?(:project)
+    end
   end
 
-  def open_merge_requests_count
-    merge_requests.opened.count
-  end
+  private
 
-  def template?
-    template
+  def cross_project_reference?(source_project, target_project)
+    source_project && target_project && source_project != target_project
   end
 
-  def text_color
-    LabelsHelper::text_color_for_bg(self.color)
+  def issues_count(user, params = {})
+    IssuesFinder.new(user, params.reverse_merge(label_name: title, scope: 'all'))
+                .execute
+                .count
   end
 
-  def title=(value)
-    write_attribute(:title, sanitize_title(value)) if value.present?
+  def merge_requests_count(user, params = {})
+    MergeRequestsFinder.new(user, params.reverse_merge(label_name: title, scope: 'all'))
+                       .execute
+                       .count
   end
 
-  private
-
   def label_format_reference(format = :id)
     raise StandardError, 'Unknown format' unless [:id, :name].include?(format)
 
@@ -137,10 +188,6 @@ class Label < ActiveRecord::Base
     end
   end
 
-  def nullify_priority
-    self.priority = nil if priority.blank?
-  end
-
   def sanitize_title(value)
     CGI.unescapeHTML(Sanitize.clean(value.to_s))
   end
diff --git a/app/models/label_priority.rb b/app/models/label_priority.rb
new file mode 100644
index 00000000000..5b85e0b6533
--- /dev/null
+++ b/app/models/label_priority.rb
@@ -0,0 +1,8 @@
+class LabelPriority < ActiveRecord::Base
+  belongs_to :project
+  belongs_to :label
+
+  validates :project, :label, :priority, presence: true
+  validates :label_id, uniqueness: { scope: :project_id }
+  validates :priority, numericality: { only_integer: true, greater_than_or_equal_to: 0 }
+end
diff --git a/app/models/list.rb b/app/models/list.rb
index eb87decdbc8..065d75bd1dc 100644
--- a/app/models/list.rb
+++ b/app/models/list.rb
@@ -26,6 +26,17 @@ class List < ActiveRecord::Base
     label? ? label.name : list_type.humanize
   end
 
+  def as_json(options = {})
+    super(options).tap do |json|
+      if options.has_key?(:label)
+        json[:label] = label.as_json(
+          project: board.project,
+          only: [:id, :title, :description, :color]
+        )
+      end
+    end
+  end
+
   private
 
   def can_be_destroyed
diff --git a/app/models/merge_request.rb b/app/models/merge_request.rb
index fedc35102ef..0cc0b3c2a0e 100644
--- a/app/models/merge_request.rb
+++ b/app/models/merge_request.rb
@@ -137,6 +137,10 @@ class MergeRequest < ActiveRecord::Base
     reference.to_i > 0 && reference.to_i <= Gitlab::Database::MAX_INT_VALUE
   end
 
+  def self.project_foreign_key
+    'target_project_id'
+  end
+
   # Returns all the merge requests from an ActiveRecord:Relation.
   #
   # This method uses a UNION as it usually operates on the result of
diff --git a/app/models/project.rb b/app/models/project.rb
index a645c9b29cc..653c38322c5 100644
--- a/app/models/project.rb
+++ b/app/models/project.rb
@@ -107,7 +107,7 @@ class Project < ActiveRecord::Base
   # Merge requests from source project should be kept when source project was removed
   has_many :fork_merge_requests, foreign_key: 'source_project_id', class_name: MergeRequest
   has_many :issues,             dependent: :destroy
-  has_many :labels,             dependent: :destroy
+  has_many :labels,             dependent: :destroy, class_name: 'ProjectLabel'
   has_many :services,           dependent: :destroy
   has_many :events,             dependent: :destroy
   has_many :milestones,         dependent: :destroy
@@ -388,6 +388,10 @@ class Project < ActiveRecord::Base
         Project.count
       end
     end
+
+    def group_ids
+      joins(:namespace).where(namespaces: { type: 'Group' }).pluck(:namespace_id)
+    end
   end
 
   def lfs_enabled?
@@ -733,10 +737,8 @@ class Project < ActiveRecord::Base
 
   def create_labels
     Label.templates.each do |label|
-      label = label.dup
-      label.template = nil
-      label.project_id = self.id
-      label.save
+      params = label.attributes.except('id', 'template', 'created_at', 'updated_at')
+      Labels::FindOrCreateService.new(owner, self, params).execute
     end
   end
 
diff --git a/app/models/project_label.rb b/app/models/project_label.rb
new file mode 100644
index 00000000000..33c2b617715
--- /dev/null
+++ b/app/models/project_label.rb
@@ -0,0 +1,34 @@
+class ProjectLabel < Label
+  MAX_NUMBER_OF_PRIORITIES = 1
+
+  belongs_to :project
+
+  validates :project, presence: true
+
+  validate :permitted_numbers_of_priorities
+  validate :title_must_not_exist_at_group_level
+
+  delegate :group, to: :project, allow_nil: true
+
+  alias_attribute :subject, :project
+
+  def to_reference(target_project = nil, format: :id)
+    super(project, target_project, format: format)
+  end
+
+  private
+
+  def title_must_not_exist_at_group_level
+    return unless group.present? && title_changed?
+
+    if group.labels.with_title(self.title).exists?
+      errors.add(:title, :label_already_exists_at_group_level, group: group.name)
+    end
+  end
+
+  def permitted_numbers_of_priorities
+    if priorities && priorities.size > MAX_NUMBER_OF_PRIORITIES
+      errors.add(:priorities, 'Number of permitted priorities exceeded')
+    end
+  end
+end
diff --git a/app/models/todo.rb b/app/models/todo.rb
index 6ae9956ade5..11c072dd000 100644
--- a/app/models/todo.rb
+++ b/app/models/todo.rb
@@ -52,7 +52,13 @@ class Todo < ActiveRecord::Base
     # Todos with highest priority first then oldest todos
     # Need to order by created_at last because of differences on Mysql and Postgres when joining by type "Merge_request/Issue"
     def order_by_labels_priority
-      highest_priority = highest_label_priority(["Issue", "MergeRequest"], "todos.target_id").to_sql
+      params = {
+        target_type: ['Issue', 'MergeRequest'],
+        target_column: "todos.target_id",
+        project_column: "todos.project_id"
+      }
+
+      highest_priority = highest_label_priority(params).to_sql
 
       select("#{table_name}.*, (#{highest_priority}) AS highest_priority").
         order(Gitlab::Database.nulls_last_order('highest_priority', 'ASC')).
diff --git a/app/policies/group_label_policy.rb b/app/policies/group_label_policy.rb
new file mode 100644
index 00000000000..7b34aa182eb
--- /dev/null
+++ b/app/policies/group_label_policy.rb
@@ -0,0 +1,5 @@
+class GroupLabelPolicy < BasePolicy
+  def rules
+    delegate! @subject.group
+  end
+end
diff --git a/app/policies/group_policy.rb b/app/policies/group_policy.rb
index 97ff6233968..b65fb68cd88 100644
--- a/app/policies/group_policy.rb
+++ b/app/policies/group_policy.rb
@@ -19,6 +19,7 @@ class GroupPolicy < BasePolicy
     if master
       can! :create_projects
       can! :admin_milestones
+      can! :admin_label
     end
 
     # Only group owner and administrators can admin group
diff --git a/app/policies/project_label_policy.rb b/app/policies/project_label_policy.rb
new file mode 100644
index 00000000000..b12b4c5166b
--- /dev/null
+++ b/app/policies/project_label_policy.rb
@@ -0,0 +1,5 @@
+class ProjectLabelPolicy < BasePolicy
+  def rules
+    delegate! @subject.project
+  end
+end
diff --git a/app/services/boards/lists/create_service.rb b/app/services/boards/lists/create_service.rb
index abc7aeece39..fe0d762ccd2 100644
--- a/app/services/boards/lists/create_service.rb
+++ b/app/services/boards/lists/create_service.rb
@@ -3,7 +3,7 @@ module Boards
     class CreateService < BaseService
       def execute(board)
         List.transaction do
-          label    = project.labels.find(params[:label_id])
+          label    = available_labels.find(params[:label_id])
           position = next_position(board)
 
           create_list(board, label, position)
@@ -12,6 +12,10 @@ module Boards
 
       private
 
+      def available_labels
+        LabelsFinder.new(current_user, project_id: project.id).execute
+      end
+
       def next_position(board)
         max_position = board.lists.movable.maximum(:position)
         max_position.nil? ? 0 : max_position.succ
diff --git a/app/services/boards/lists/generate_service.rb b/app/services/boards/lists/generate_service.rb
index d8048f1c67e..939f9bfd068 100644
--- a/app/services/boards/lists/generate_service.rb
+++ b/app/services/boards/lists/generate_service.rb
@@ -19,8 +19,7 @@ module Boards
       end
 
       def find_or_create_label(params)
-        project.labels.create_with(color: params[:color])
-                      .find_or_create_by(name: params[:name])
+        ::Labels::FindOrCreateService.new(current_user, project, params).execute
       end
 
       def label_params
diff --git a/app/services/issuable_base_service.rb b/app/services/issuable_base_service.rb
index 57d521f2fea..bb92cd80cc9 100644
--- a/app/services/issuable_base_service.rb
+++ b/app/services/issuable_base_service.rb
@@ -80,17 +80,18 @@ class IssuableBaseService < BaseService
   def filter_labels_in_param(key)
     return if params[key].to_a.empty?
 
-    params[key] = project.labels.where(id: params[key]).pluck(:id)
+    params[key] = available_labels.where(id: params[key]).pluck(:id)
   end
 
   def find_or_create_label_ids
     labels = params.delete(:labels)
     return unless labels
 
-    params[:label_ids] = labels.split(",").map do |label_name|
-      project.labels.create_with(color: Label::DEFAULT_COLOR)
-                    .find_or_create_by(title: label_name.strip)
-                    .id
+    params[:label_ids] = labels.split(',').map do |label_name|
+      service = Labels::FindOrCreateService.new(current_user, project, title: label_name.strip)
+      label   = service.execute
+
+      label.id
     end
   end
 
@@ -111,6 +112,10 @@ class IssuableBaseService < BaseService
     new_label_ids
   end
 
+  def available_labels
+    LabelsFinder.new(current_user, project_id: @project.id).execute
+  end
+
   def merge_slash_commands_into_params!(issuable)
     description, command_params =
       SlashCommands::InterpretService.new(project, current_user).
diff --git a/app/services/issues/move_service.rb b/app/services/issues/move_service.rb
index ab667456db7..a2a5f57d069 100644
--- a/app/services/issues/move_service.rb
+++ b/app/services/issues/move_service.rb
@@ -52,8 +52,12 @@ module Issues
     end
 
     def cloneable_label_ids
-      @new_project.labels
-        .where(title: @old_issue.labels.pluck(:title)).pluck(:id)
+      params = {
+        project_id: @new_project.id,
+        title: @old_issue.labels.pluck(:title)
+      }
+
+      LabelsFinder.new(current_user, params).execute.pluck(:id)
     end
 
     def cloneable_milestone_id
diff --git a/app/services/labels/find_or_create_service.rb b/app/services/labels/find_or_create_service.rb
new file mode 100644
index 00000000000..74291312c4e
--- /dev/null
+++ b/app/services/labels/find_or_create_service.rb
@@ -0,0 +1,33 @@
+module Labels
+  class FindOrCreateService
+    def initialize(current_user, project, params = {})
+      @current_user = current_user
+      @group = project.group
+      @project = project
+      @params = params.dup
+    end
+
+    def execute
+      find_or_create_label
+    end
+
+    private
+
+    attr_reader :current_user, :group, :project, :params
+
+    def available_labels
+      @available_labels ||= LabelsFinder.new(current_user, project_id: project.id).execute
+    end
+
+    def find_or_create_label
+      new_label = available_labels.find_by(title: title)
+      new_label ||= project.labels.create(params)
+
+      new_label
+    end
+
+    def title
+      params[:title] || params[:name]
+    end
+  end
+end
diff --git a/app/services/labels/transfer_service.rb b/app/services/labels/transfer_service.rb
new file mode 100644
index 00000000000..514679ed29d
--- /dev/null
+++ b/app/services/labels/transfer_service.rb
@@ -0,0 +1,78 @@
+# Labels::TransferService class
+#
+# User for recreate the missing group labels at project level
+#
+module Labels
+  class TransferService
+    def initialize(current_user, old_group, project)
+      @current_user = current_user
+      @old_group = old_group
+      @project = project
+    end
+
+    def execute
+      return unless old_group.present?
+
+      Label.transaction do
+        labels_to_transfer.find_each do |label|
+          new_label_id = find_or_create_label!(label)
+
+          next if new_label_id == label.id
+
+          update_label_links(group_labels_applied_to_issues, old_label_id: label.id, new_label_id: new_label_id)
+          update_label_links(group_labels_applied_to_merge_requests, old_label_id: label.id, new_label_id: new_label_id)
+          update_label_priorities(old_label_id: label.id, new_label_id: new_label_id)
+        end
+      end
+    end
+
+    private
+
+    attr_reader :current_user, :old_group, :project
+
+    def labels_to_transfer
+      label_ids = []
+      label_ids << group_labels_applied_to_issues.select(:id)
+      label_ids << group_labels_applied_to_merge_requests.select(:id)
+
+      union = Gitlab::SQL::Union.new(label_ids)
+
+      Label.where("labels.id IN (#{union.to_sql})").reorder(nil).uniq
+    end
+
+    def group_labels_applied_to_issues
+      Label.joins(:issues).
+        where(
+          issues: { project_id: project.id },
+          labels: { type: 'GroupLabel', group_id: old_group.id }
+        )
+    end
+
+    def group_labels_applied_to_merge_requests
+      Label.joins(:merge_requests).
+        where(
+          merge_requests: { target_project_id: project.id },
+          labels: { type: 'GroupLabel', group_id: old_group.id }
+        )
+    end
+
+    def find_or_create_label!(label)
+      params    = label.attributes.slice('title', 'description', 'color')
+      new_label = FindOrCreateService.new(current_user, project, params).execute
+
+      new_label.id
+    end
+
+    def update_label_links(labels, old_label_id:, new_label_id:)
+      LabelLink.joins(:label).
+        merge(labels).
+        where(label_id: old_label_id).
+        update_all(label_id: new_label_id)
+    end
+
+    def update_label_priorities(old_label_id:, new_label_id:)
+      LabelPriority.where(project_id: project.id, label_id: old_label_id).
+        update_all(label_id: new_label_id)
+    end
+  end
+end
diff --git a/app/services/projects/autocomplete_service.rb b/app/services/projects/autocomplete_service.rb
index f578f8dbea2..015f2828921 100644
--- a/app/services/projects/autocomplete_service.rb
+++ b/app/services/projects/autocomplete_service.rb
@@ -13,7 +13,7 @@ module Projects
     end
 
     def labels
-      @project.labels.select([:title, :color])
+      LabelsFinder.new(current_user, project_id: project.id).execute.select([:title, :color])
     end
 
     def commands(noteable, type)
diff --git a/app/services/projects/transfer_service.rb b/app/services/projects/transfer_service.rb
index bc7f8bf433b..28470f59807 100644
--- a/app/services/projects/transfer_service.rb
+++ b/app/services/projects/transfer_service.rb
@@ -28,6 +28,7 @@ module Projects
       Project.transaction do
         old_path = project.path_with_namespace
         old_namespace = project.namespace
+        old_group = project.group
         new_path = File.join(new_namespace.try(:path) || '', project.path)
 
         if Project.where(path: project.path, namespace_id: new_namespace.try(:id)).present?
@@ -57,6 +58,9 @@ module Projects
         # Move wiki repo also if present
         gitlab_shell.mv_repository(project.repository_storage_path, "#{old_path}.wiki", "#{new_path}.wiki")
 
+        # Move missing group labels to project
+        Labels::TransferService.new(current_user, old_group, project).execute
+
         # clear project cached events
         project.reset_events_cache
 
diff --git a/app/services/slash_commands/interpret_service.rb b/app/services/slash_commands/interpret_service.rb
index e4ae3dec8aa..5a81194a5f4 100644
--- a/app/services/slash_commands/interpret_service.rb
+++ b/app/services/slash_commands/interpret_service.rb
@@ -116,8 +116,10 @@ module SlashCommands
     desc 'Add label(s)'
     params '~label1 ~"label 2"'
     condition do
+      available_labels = LabelsFinder.new(current_user, project_id: project.id).execute
+
       current_user.can?(:"admin_#{issuable.to_ability_name}", project) &&
-        project.labels.any?
+        available_labels.any?
     end
     command :label do |labels_param|
       label_ids = find_label_ids(labels_param)
@@ -248,7 +250,7 @@ module SlashCommands
 
     def find_label_ids(labels_param)
       label_ids_by_reference = extract_references(labels_param, :label).map(&:id)
-      labels_ids_by_name = @project.labels.where(name: labels_param.split).select(:id)
+      labels_ids_by_name = LabelsFinder.new(current_user, project_id: project.id, name: labels_param.split).execute.select(:id)
 
       label_ids_by_reference | labels_ids_by_name
     end
diff --git a/app/views/groups/labels/destroy.js.haml b/app/views/groups/labels/destroy.js.haml
new file mode 100644
index 00000000000..3dfbfc77c0d
--- /dev/null
+++ b/app/views/groups/labels/destroy.js.haml
@@ -0,0 +1,2 @@
+- if @group.labels.empty?
+  $('.labels').load(document.URL + ' .nothing-here-block').hide().fadeIn(1000)
diff --git a/app/views/groups/labels/edit.html.haml b/app/views/groups/labels/edit.html.haml
new file mode 100644
index 00000000000..836981fc6fd
--- /dev/null
+++ b/app/views/groups/labels/edit.html.haml
@@ -0,0 +1,7 @@
+- page_title 'Edit', @label.name, 'Labels'
+
+%h3.page-title
+  Edit Label
+%hr
+
+= render 'shared/labels/form', url: group_label_path(@group, @label), back_path: @previous_labels_path
diff --git a/app/views/groups/labels/index.html.haml b/app/views/groups/labels/index.html.haml
new file mode 100644
index 00000000000..70783a63409
--- /dev/null
+++ b/app/views/groups/labels/index.html.haml
@@ -0,0 +1,20 @@
+- page_title 'Labels'
+
+.top-area.adjust
+  .nav-text
+    Labels can be applied to issues and merge requests. Group labels are available for any project within the group.
+
+  .nav-controls
+    - if can?(current_user, :admin_label, @group)
+      = link_to new_group_label_path(@group), class: "btn btn-new" do
+        New label
+
+.labels
+  .other-labels
+    - if @labels.present?
+      %ul.content-list.manage-labels-list.js-other-labels
+        = render partial: 'shared/label', collection: @labels, as: :label
+        = paginate @labels, theme: 'gitlab'
+    - else
+      .nothing-here-block
+        No labels created yet.
diff --git a/app/views/groups/labels/new.html.haml b/app/views/groups/labels/new.html.haml
new file mode 100644
index 00000000000..2be87460b1d
--- /dev/null
+++ b/app/views/groups/labels/new.html.haml
@@ -0,0 +1,8 @@
+- page_title 'New Label'
+- header_title group_title(@group, 'Labels', group_labels_path(@group))
+
+%h3.page-title
+  New Label
+%hr
+
+= render 'shared/labels/form', url: group_labels_path, back_path: @previous_labels_path
diff --git a/app/views/layouts/nav/_group.html.haml b/app/views/layouts/nav/_group.html.haml
index 27ac1760166..f7edb47b666 100644
--- a/app/views/layouts/nav/_group.html.haml
+++ b/app/views/layouts/nav/_group.html.haml
@@ -13,6 +13,10 @@
       = link_to activity_group_path(@group), title: 'Activity' do
         %span
           Activity
+    = nav_link(controller: [:group, :labels]) do
+      = link_to group_labels_path(@group), title: 'Labels' do
+        %span
+          Labels
     = nav_link(controller: [:group, :milestones]) do
       = link_to group_milestones_path(@group), title: 'Milestones' do
         %span
diff --git a/app/views/projects/issues/_issue.html.haml b/app/views/projects/issues/_issue.html.haml
index 8b1a8a8a2d9..c80210d6ff4 100644
--- a/app/views/projects/issues/_issue.html.haml
+++ b/app/views/projects/issues/_issue.html.haml
@@ -50,7 +50,7 @@
     - if issue.labels.any?
       &nbsp;
       - issue.labels.each do |label|
-        = link_to_label(label, project: issue.project)
+        = link_to_label(label, subject: issue.project)
     - if issue.tasks?
       &nbsp;
       %span.task-status
diff --git a/app/views/projects/labels/_label.html.haml b/app/views/projects/labels/_label.html.haml
deleted file mode 100644
index 71f7f354d72..00000000000
--- a/app/views/projects/labels/_label.html.haml
+++ /dev/null
@@ -1,50 +0,0 @@
-- label_css_id = dom_id(label)
-%li{id: label_css_id, data: { id: label.id } }
-  = render "shared/label_row", label: label
-
-  .visible-xs.visible-sm-inline-block.visible-md-inline-block.dropdown
-    %button.btn.btn-default.label-options-toggle{ data: { toggle: "dropdown" } }
-      Options
-      = icon('caret-down')
-    .dropdown-menu.dropdown-menu-align-right
-      %ul
-        %li
-          = link_to_label(label, type: :merge_request) do
-            = pluralize label.open_merge_requests_count, 'merge request'
-        %li
-          = link_to_label(label) do
-            = pluralize label.open_issues_count(current_user), 'open issue'
-        - if current_user
-          %li.label-subscription{ data: { url: toggle_subscription_namespace_project_label_path(@project.namespace, @project, label) } }
-            %a.js-subscribe-button.label-subscribe-button.subscription-status{ role: "button", href: "#", data: { toggle: "tooltip", status: label_subscription_status(label) } }
-              %span= label_subscription_toggle_button_text(label)
-        - if can? current_user, :admin_label, @project
-          %li
-            = link_to "Edit", edit_namespace_project_label_path(@project.namespace, @project, label)
-          %li
-            = link_to "Delete", namespace_project_label_path(@project.namespace, @project, label), title: "Delete", method: :delete, remote: true, data: {confirm: "Remove this label? Are you sure?"}
-
-  .pull-right.hidden-xs.hidden-sm.hidden-md
-    = link_to_label(label, type: :merge_request, css_class: 'btn btn-transparent btn-action') do
-      = pluralize label.open_merge_requests_count, 'merge request'
-    = link_to_label(label, css_class: 'btn btn-transparent btn-action') do
-      = pluralize label.open_issues_count(current_user), 'open issue'
-
-    - if current_user
-      .label-subscription.inline{ data: { url: toggle_subscription_namespace_project_label_path(@project.namespace, @project, label) } }
-        %button.js-subscribe-button.label-subscribe-button.btn.btn-transparent.btn-action.subscription-status{ type: "button", title: label_subscription_toggle_button_text(label), data: { toggle: "tooltip", status: label_subscription_status(label) } }
-          %span.sr-only= label_subscription_toggle_button_text(label)
-          = icon('eye', class: 'label-subscribe-button-icon')
-          = icon('spinner spin', class: 'label-subscribe-button-loading')
-
-    - if can? current_user, :admin_label, @project
-      = link_to edit_namespace_project_label_path(@project.namespace, @project, label), title: "Edit", class: 'btn btn-transparent btn-action', data: {toggle: "tooltip"} do
-        %span.sr-only Edit
-        = icon('pencil-square-o')
-      = link_to namespace_project_label_path(@project.namespace, @project, label), title: "Delete", class: 'btn btn-transparent btn-action remove-row', method: :delete, remote: true, data: {confirm: "Remove this label? Are you sure?", toggle: "tooltip"} do
-        %span.sr-only Delete
-        = icon('trash-o')
-
-  - if current_user
-    :javascript
-      new Subscription('##{dom_id(label)} .label-subscription');
diff --git a/app/views/projects/labels/destroy.js.haml b/app/views/projects/labels/destroy.js.haml
index d59563b122a..8d09e2bda11 100644
--- a/app/views/projects/labels/destroy.js.haml
+++ b/app/views/projects/labels/destroy.js.haml
@@ -1,2 +1,2 @@
-- if @project.labels.size == 0
+- if @labels.empty?
   $('.labels').load(document.URL + ' .nothing-here-block').hide().fadeIn(1000)
diff --git a/app/views/projects/labels/edit.html.haml b/app/views/projects/labels/edit.html.haml
index 52b187e7e58..a80a07b52e6 100644
--- a/app/views/projects/labels/edit.html.haml
+++ b/app/views/projects/labels/edit.html.haml
@@ -6,4 +6,4 @@
   %h3.page-title
     Edit Label
   %hr
-  = render 'form'
+  = render 'shared/labels/form', url: namespace_project_label_path(@project.namespace.becomes(Namespace), @project, @label), back_path: namespace_project_labels_path(@project.namespace, @project)
diff --git a/app/views/projects/labels/index.html.haml b/app/views/projects/labels/index.html.haml
index db66a0edbd8..f135bf6f6b4 100644
--- a/app/views/projects/labels/index.html.haml
+++ b/app/views/projects/labels/index.html.haml
@@ -16,21 +16,22 @@
   .labels
     - if can?(current_user, :admin_label, @project)
       -# Only show it in the first page
-      - hide = @project.labels.empty? || (params[:page].present? && params[:page] != '1')
+      - hide = @available_labels.empty? || (params[:page].present? && params[:page] != '1')
       .prioritized-labels{ class: ('hide' if hide) }
         %h5 Prioritized Labels
         %ul.content-list.manage-labels-list.js-prioritized-labels{ "data-url" => set_priorities_namespace_project_labels_path(@project.namespace, @project) }
           %p.empty-message{ class: ('hidden' unless @prioritized_labels.empty?) } No prioritized labels yet
           - if @prioritized_labels.present?
-            = render @prioritized_labels
+            = render partial: 'shared/label', collection: @prioritized_labels, as: :label
+
     .other-labels
       - if can?(current_user, :admin_label, @project)
         %h5{ class: ('hide' if hide) } Other Labels
-      - if @labels.present?
-        %ul.content-list.manage-labels-list.js-other-labels
-          = render @labels
+      %ul.content-list.manage-labels-list.js-other-labels
+        - if @labels.present?
+          = render partial: 'shared/label', collection: @labels, as: :label
         = paginate @labels, theme: 'gitlab'
-      - else
+      - if @labels.blank?
         .nothing-here-block
           - if can?(current_user, :admin_label, @project)
             Create a label or #{link_to 'generate a default set of labels', generate_namespace_project_labels_path(@project.namespace, @project), method: :post}.
diff --git a/app/views/projects/labels/new.html.haml b/app/views/projects/labels/new.html.haml
index a1bb66cfb6c..f0d9be744d1 100644
--- a/app/views/projects/labels/new.html.haml
+++ b/app/views/projects/labels/new.html.haml
@@ -6,4 +6,4 @@
   %h3.page-title
     New Label
   %hr
-  = render 'form'
+  = render 'shared/labels/form', url: namespace_project_labels_path(@project.namespace.becomes(Namespace), @project), back_path: namespace_project_labels_path(@project.namespace, @project)
diff --git a/app/views/projects/merge_requests/_merge_request.html.haml b/app/views/projects/merge_requests/_merge_request.html.haml
index 68fb7d5a414..12408068834 100644
--- a/app/views/projects/merge_requests/_merge_request.html.haml
+++ b/app/views/projects/merge_requests/_merge_request.html.haml
@@ -62,7 +62,7 @@
     - if merge_request.labels.any?
       &nbsp;
       - merge_request.labels.each do |label|
-        = link_to_label(label, project: merge_request.project, type: 'merge_request')
+        = link_to_label(label, subject: merge_request.project, type: :merge_request)
     - if merge_request.tasks?
       &nbsp;
       %span.task-status
diff --git a/app/views/shared/_label.html.haml b/app/views/shared/_label.html.haml
new file mode 100644
index 00000000000..40c8d2af226
--- /dev/null
+++ b/app/views/shared/_label.html.haml
@@ -0,0 +1,53 @@
+- label_css_id = dom_id(label)
+- open_issues_count = label.open_issues_count(current_user, @project)
+- open_merge_requests_count = label.open_merge_requests_count(current_user, @project)
+
+%li{id: label_css_id, data: { id: label.id } }
+  = render "shared/label_row", label: label
+
+  .visible-xs.visible-sm-inline-block.visible-md-inline-block.dropdown
+    %button.btn.btn-default.label-options-toggle{ data: { toggle: "dropdown" } }
+      Options
+      = icon('caret-down')
+    .dropdown-menu.dropdown-menu-align-right
+      %ul
+        %li
+          = link_to_label(label, subject: @project, type: :merge_request) do
+            = pluralize open_merge_requests_count, 'merge request'
+        %li
+          = link_to_label(label, subject: @project) do
+            = pluralize open_issues_count, 'open issue'
+        - if current_user
+          %li.label-subscription{ data: toggle_subscription_data(label) }
+            %a.js-subscribe-button.label-subscribe-button.subscription-status{ role: "button", href: "#", data: { toggle: "tooltip", status: label_subscription_status(label) } }
+              %span= label_subscription_toggle_button_text(label)
+        - if can?(current_user, :admin_label, label)
+          %li
+            = link_to 'Edit', edit_label_path(label)
+          %li
+            = link_to 'Delete', destroy_label_path(label), title: 'Delete', method: :delete, remote: true, data: {confirm: 'Remove this label? Are you sure?'}
+
+  .pull-right.hidden-xs.hidden-sm.hidden-md
+    = link_to_label(label, subject: @project, type: :merge_request, css_class: 'btn btn-transparent btn-action') do
+      = pluralize open_merge_requests_count, 'merge request'
+    = link_to_label(label, subject: @project, css_class: 'btn btn-transparent btn-action') do
+      = pluralize open_issues_count, 'open issue'
+
+    - if current_user
+      .label-subscription.inline{ data: toggle_subscription_data(label) }
+        %button.js-subscribe-button.label-subscribe-button.btn.btn-transparent.btn-action.subscription-status{ type: "button", title: label_subscription_toggle_button_text(label), data: { toggle: "tooltip", status: label_subscription_status(label) } }
+          %span.sr-only= label_subscription_toggle_button_text(label)
+          = icon('eye', class: 'label-subscribe-button-icon', disabled: label.is_a?(GroupLabel))
+          = icon('spinner spin', class: 'label-subscribe-button-loading')
+
+    - if can?(current_user, :admin_label, label)
+      = link_to edit_label_path(label), title: "Edit", class: 'btn btn-transparent btn-action', data: {toggle: "tooltip"} do
+        %span.sr-only Edit
+        = icon('pencil-square-o')
+      = link_to destroy_label_path(label), title: "Delete", class: 'btn btn-transparent btn-action remove-row', method: :delete, remote: true, data: {confirm: label_deletion_confirm_text(label), toggle: "tooltip"} do
+        %span.sr-only Delete
+        = icon('trash-o')
+
+  - if current_user && label.is_a?(ProjectLabel)
+    :javascript
+      new Subscription('##{dom_id(label)} .label-subscription');
diff --git a/app/views/shared/_label_row.html.haml b/app/views/shared/_label_row.html.haml
index 6f593e8dff9..d28f9421ecf 100644
--- a/app/views/shared/_label_row.html.haml
+++ b/app/views/shared/_label_row.html.haml
@@ -3,13 +3,16 @@
     .draggable-handler
       = icon('bars')
     .js-toggle-priority.toggle-priority{ data: { url: remove_priority_namespace_project_label_path(@project.namespace, @project, label),
-      dom_id: dom_id(label) } }
+      dom_id: dom_id(label), type: label.type } }
       %button.add-priority.btn.has-tooltip{ title: 'Prioritize', :'data-placement' => 'top' }
         = icon('star-o')
       %button.remove-priority.btn.has-tooltip{ title: 'Remove priority', :'data-placement' => 'top' }
         = icon('star')
   %span.label-name
-    = link_to_label(label, tooltip: false)
+    = link_to_label(label, subject: @project, tooltip: false)
+  - if defined?(@project) && @project.group.present?
+    %span.label-type
+      = label.model_name.human.titleize
   - if label.description
     %span.label-description
       = markdown_field(label, :description)
diff --git a/app/views/shared/_labels_row.html.haml b/app/views/shared/_labels_row.html.haml
index e324d0e5203..21b37a7c9ae 100644
--- a/app/views/shared/_labels_row.html.haml
+++ b/app/views/shared/_labels_row.html.haml
@@ -1,5 +1,5 @@
 - labels.each do |label|
   %span.label-row.btn-group{ role: "group", aria: { label: label.name }, style: "color: #{text_color_for_bg(label.color)}" }
-    = link_to_label(label, css_class: 'btn btn-transparent')
+    = link_to_label(label, subject: @project, css_class: 'btn btn-transparent')
     %button.btn.btn-transparent.label-remove.js-label-filter-remove{ type: "button", style: "background-color: #{label.color};", data: { label: label.title } }
       = icon("times")
diff --git a/app/views/shared/issuable/_filter.html.haml b/app/views/shared/issuable/_filter.html.haml
index 6b43a76c404..ed93857e6d4 100644
--- a/app/views/shared/issuable/_filter.html.haml
+++ b/app/views/shared/issuable/_filter.html.haml
@@ -78,11 +78,10 @@
           = hidden_field_tag :state_event, params[:state_event]
           .filter-item.inline
             = button_tag "Update #{type.to_s.humanize(capitalize: false)}", class: "btn update_selected_issues btn-save"
-
-  - if !@labels.nil?
-    .row-content-block.second-block.filtered-labels{ class: ("hidden" if !@labels.any?) }
-      - if @labels.any?
-        = render "shared/labels_row", labels: @labels
+  - has_labels = @labels && @labels.any?
+  .row-content-block.second-block.filtered-labels{ class: ("hidden" unless has_labels) }
+    - if has_labels
+      = render 'shared/labels_row', labels: @labels
 
 :javascript
   new UsersSelect();
diff --git a/app/views/shared/issuable/_form.html.haml b/app/views/shared/issuable/_form.html.haml
index ee5c21f0762..d410755cad1 100644
--- a/app/views/shared/issuable/_form.html.haml
+++ b/app/views/shared/issuable/_form.html.haml
@@ -95,7 +95,7 @@
           .issuable-form-select-holder
             = render "shared/issuable/milestone_dropdown", selected: issuable.milestone, name: "#{issuable.class.model_name.param_key}[milestone_id]", show_any: false, show_upcoming: false, extra_class: "js-issuable-form-dropdown js-dropdown-keep-input", dropdown_title: "Select milestone"
       .form-group
-        - has_labels = issuable.project.labels.any?
+        - has_labels = @labels && @labels.any?
         = f.label :label_ids, "Labels", class: "control-label #{"col-lg-4" if has_due_date}"
         = f.hidden_field :label_ids, multiple: true, value: ''
         .col-sm-10{ class: "#{"col-lg-8" if has_due_date} #{'issuable-form-padding-top' if !has_labels}" }
diff --git a/app/views/shared/issuable/_sidebar.html.haml b/app/views/shared/issuable/_sidebar.html.haml
index ba9f0c27661..7363ead09ff 100644
--- a/app/views/shared/issuable/_sidebar.html.haml
+++ b/app/views/shared/issuable/_sidebar.html.haml
@@ -107,7 +107,7 @@
                   = dropdown_content do
                     .js-due-date-calendar
 
-      - if issuable.project.labels.any?
+      - if @labels && @labels.any?
         - selected_labels = issuable.labels
         .block.labels
           .sidebar-collapsed-icon.js-sidebar-labels-tooltip{ title: issuable_labels_tooltip(issuable.labels_array), data: { placement: "left", container: "body" } }
diff --git a/app/views/projects/labels/_form.html.haml b/app/views/shared/labels/_form.html.haml
index 6ab6ae50389..647e05e5ff7 100644
--- a/app/views/projects/labels/_form.html.haml
+++ b/app/views/shared/labels/_form.html.haml
@@ -1,4 +1,4 @@
-= form_for [@project.namespace.becomes(Namespace), @project, @label], html: { class: 'form-horizontal label-form js-quick-submit js-requires-input' } do |f|
+= form_for @label, as: :label, url: url, html: { class: 'form-horizontal label-form js-quick-submit js-requires-input' } do |f|
   = form_errors(@label)
 
   .form-group
@@ -30,4 +30,4 @@
       = f.submit 'Save changes', class: 'btn btn-save js-save-button'
     - else
       = f.submit 'Create Label', class: 'btn btn-create js-save-button'
-    = link_to "Cancel", namespace_project_labels_path(@project.namespace, @project), class: 'btn btn-cancel'
+    = link_to 'Cancel', back_path, class: 'btn btn-cancel'
diff --git a/config/locales/en.yml b/config/locales/en.yml
index cedb5e207bd..12a59be79f0 100644
--- a/config/locales/en.yml
+++ b/config/locales/en.yml
@@ -5,6 +5,7 @@ en:
   hello: "Hello world"
   errors:
     messages:
+      label_already_exists_at_group_level: "already exists at group level for %{group}. Please choose another one."
       wrong_size: "is the wrong size (should be %{file_size})"
       size_too_small: "is too small (should be at least %{file_size})"
       size_too_big: "is too big (should be at most %{file_size})"
diff --git a/config/routes/group.rb b/config/routes/group.rb
index 06b464d79c8..4838c9d91c6 100644
--- a/config/routes/group.rb
+++ b/config/routes/group.rb
@@ -28,5 +28,7 @@ resources :groups, constraints: { id: /[a-zA-Z.0-9_\-]+(?<!\.atom)/ }  do
 
     resource :avatar, only: [:destroy]
     resources :milestones, constraints: { id: /[^\/]+/ }, only: [:index, :show, :update, :new, :create]
+
+    resources :labels, except: [:show], constraints: { id: /\d+/ }
   end
 end
diff --git a/db/migrate/20160919144305_add_type_to_labels.rb b/db/migrate/20160919144305_add_type_to_labels.rb
new file mode 100644
index 00000000000..66172bda6ff
--- /dev/null
+++ b/db/migrate/20160919144305_add_type_to_labels.rb
@@ -0,0 +1,14 @@
+class AddTypeToLabels < ActiveRecord::Migration
+  include Gitlab::Database::MigrationHelpers
+
+  DOWNTIME = true
+  DOWNTIME_REASON = 'Labels will not work as expected until this migration is complete.'
+
+  def change
+    add_column :labels, :type, :string
+
+    update_column_in_batches(:labels, :type, 'ProjectLabel') do |table, query|
+      query.where(table[:project_id].not_eq(nil))
+    end
+  end
+end
diff --git a/db/migrate/20160919145149_add_group_id_to_labels.rb b/db/migrate/20160919145149_add_group_id_to_labels.rb
new file mode 100644
index 00000000000..05e21af0584
--- /dev/null
+++ b/db/migrate/20160919145149_add_group_id_to_labels.rb
@@ -0,0 +1,13 @@
+class AddGroupIdToLabels < ActiveRecord::Migration
+  include Gitlab::Database::MigrationHelpers
+
+  DOWNTIME = false
+
+  disable_ddl_transaction!
+
+  def change
+    add_column :labels, :group_id, :integer
+    add_foreign_key :labels, :namespaces, column: :group_id, on_delete: :cascade
+    add_concurrent_index :labels, :group_id
+  end
+end
diff --git a/db/migrate/20161014173530_create_label_priorities.rb b/db/migrate/20161014173530_create_label_priorities.rb
new file mode 100644
index 00000000000..2c22841c28a
--- /dev/null
+++ b/db/migrate/20161014173530_create_label_priorities.rb
@@ -0,0 +1,25 @@
+class CreateLabelPriorities < ActiveRecord::Migration
+  include Gitlab::Database::MigrationHelpers
+
+  DOWNTIME = true
+  DOWNTIME_REASON = 'This migration adds foreign keys'
+
+  disable_ddl_transaction!
+
+  def up
+    create_table :label_priorities do |t|
+      t.references :project, foreign_key: { on_delete: :cascade }, null: false
+      t.references :label, foreign_key: { on_delete: :cascade }, null: false
+      t.integer :priority, null: false
+
+      t.timestamps null: false
+    end
+
+    add_concurrent_index :label_priorities, [:project_id, :label_id], unique: true
+    add_concurrent_index :label_priorities, :priority
+  end
+
+  def down
+    drop_table :label_priorities
+  end
+end
diff --git a/db/migrate/20161017125927_add_unique_index_to_labels.rb b/db/migrate/20161017125927_add_unique_index_to_labels.rb
new file mode 100644
index 00000000000..16ae38612de
--- /dev/null
+++ b/db/migrate/20161017125927_add_unique_index_to_labels.rb
@@ -0,0 +1,32 @@
+class AddUniqueIndexToLabels < ActiveRecord::Migration
+  include Gitlab::Database::MigrationHelpers
+
+  DOWNTIME = true
+  DOWNTIME_REASON = 'This migration removes duplicated labels.'
+
+  disable_ddl_transaction!
+
+  def up
+    select_all('SELECT title, COUNT(id) as cnt FROM labels GROUP BY project_id, title HAVING COUNT(id) > 1').each do |label|
+      label_title = quote_string(label['title'])
+      duplicated_ids = select_all("SELECT id FROM labels WHERE title = '#{label_title}' ORDER BY id ASC").map{ |label| label['id'] }
+      label_id = duplicated_ids.first
+      duplicated_ids.delete(label_id)
+
+      execute("UPDATE label_links SET label_id = #{label_id} WHERE label_id IN(#{duplicated_ids.join(",")})")
+      execute("DELETE FROM labels WHERE id IN(#{duplicated_ids.join(",")})")
+    end
+
+    remove_index :labels, column: :project_id if index_exists?(:labels, :project_id)
+    remove_index :labels, column: :title if index_exists?(:labels, :title)
+
+    add_concurrent_index :labels, [:group_id, :project_id, :title], unique: true
+  end
+
+  def down
+    remove_index :labels, column: [:group_id, :project_id, :title] if index_exists?(:labels, [:group_id, :project_id, :title], unique: true)
+
+    add_concurrent_index :labels, :project_id
+    add_concurrent_index :labels, :title
+  end
+end
diff --git a/db/migrate/20161018024215_migrate_labels_priority.rb b/db/migrate/20161018024215_migrate_labels_priority.rb
new file mode 100644
index 00000000000..22bec2382f4
--- /dev/null
+++ b/db/migrate/20161018024215_migrate_labels_priority.rb
@@ -0,0 +1,36 @@
+class MigrateLabelsPriority < ActiveRecord::Migration
+  include Gitlab::Database::MigrationHelpers
+
+  DOWNTIME = true
+  DOWNTIME_REASON = 'Prioritized labels will not work as expected until this migration is complete.'
+
+  disable_ddl_transaction!
+
+  def up
+    execute <<-EOF.strip_heredoc
+      INSERT INTO label_priorities (project_id, label_id, priority, created_at, updated_at)
+      SELECT labels.project_id, labels.id, labels.priority, NOW(), NOW()
+      FROM labels
+      WHERE labels.project_id IS NOT NULL
+        AND labels.priority IS NOT NULL;
+    EOF
+  end
+
+  def down
+    if Gitlab::Database.mysql?
+      execute <<-EOF.strip_heredoc
+        UPDATE labels
+          INNER JOIN label_priorities ON labels.id = label_priorities.label_id AND labels.project_id = label_priorities.project_id
+        SET labels.priority = label_priorities.priority;
+      EOF
+    else
+      execute <<-EOF.strip_heredoc
+        UPDATE labels
+        SET priority = label_priorities.priority
+        FROM label_priorities
+        WHERE labels.id = label_priorities.label_id
+          AND labels.project_id = label_priorities.project_id;
+      EOF
+    end
+  end
+end
diff --git a/db/migrate/20161018024550_remove_priority_from_labels.rb b/db/migrate/20161018024550_remove_priority_from_labels.rb
new file mode 100644
index 00000000000..b7416cca664
--- /dev/null
+++ b/db/migrate/20161018024550_remove_priority_from_labels.rb
@@ -0,0 +1,17 @@
+class RemovePriorityFromLabels < ActiveRecord::Migration
+  include Gitlab::Database::MigrationHelpers
+
+  DOWNTIME = true
+  DOWNTIME_REASON = 'This migration removes an existing column'
+
+  disable_ddl_transaction!
+
+  def up
+    remove_column :labels, :priority, :integer, index: true
+  end
+
+  def down
+    add_column :labels, :priority, :integer
+    add_concurrent_index :labels, :priority
+  end
+end
diff --git a/db/schema.rb b/db/schema.rb
index 5ce855fe08f..65f55aa109b 100644
--- a/db/schema.rb
+++ b/db/schema.rb
@@ -11,7 +11,7 @@
 #
 # It's strongly recommended that you check this file into your version control system.
 
-ActiveRecord::Schema.define(version: 20161017095000) do
+ActiveRecord::Schema.define(version: 20161018024550) do
 
   # These are extensions that must be enabled in order to support this database
   enable_extension "plpgsql"
@@ -519,6 +519,17 @@ ActiveRecord::Schema.define(version: 20161017095000) do
   add_index "label_links", ["label_id"], name: "index_label_links_on_label_id", using: :btree
   add_index "label_links", ["target_id", "target_type"], name: "index_label_links_on_target_id_and_target_type", using: :btree
 
+  create_table "label_priorities", force: :cascade do |t|
+    t.integer "project_id", null: false
+    t.integer "label_id", null: false
+    t.integer "priority", null: false
+    t.datetime "created_at", null: false
+    t.datetime "updated_at", null: false
+  end
+
+  add_index "label_priorities", ["priority"], name: "index_label_priorities_on_priority", using: :btree
+  add_index "label_priorities", ["project_id", "label_id"], name: "index_label_priorities_on_project_id_and_label_id", unique: true, using: :btree
+
   create_table "labels", force: :cascade do |t|
     t.string "title"
     t.string "color"
@@ -527,13 +538,13 @@ ActiveRecord::Schema.define(version: 20161017095000) do
     t.datetime "updated_at"
     t.boolean "template", default: false
     t.string "description"
-    t.integer "priority"
     t.text "description_html"
+    t.string "type"
+    t.integer "group_id"
   end
 
-  add_index "labels", ["priority"], name: "index_labels_on_priority", using: :btree
-  add_index "labels", ["project_id"], name: "index_labels_on_project_id", using: :btree
-  add_index "labels", ["title"], name: "index_labels_on_title", using: :btree
+  add_index "labels", ["group_id", "project_id", "title"], name: "index_labels_on_group_id_and_project_id_and_title", unique: true, using: :btree
+  add_index "labels", ["group_id"], name: "index_labels_on_group_id", using: :btree
 
   create_table "lfs_objects", force: :cascade do |t|
     t.string "oid", null: false
@@ -1213,6 +1224,9 @@ ActiveRecord::Schema.define(version: 20161017095000) do
 
   add_foreign_key "boards", "projects"
   add_foreign_key "issue_metrics", "issues", on_delete: :cascade
+  add_foreign_key "label_priorities", "labels", on_delete: :cascade
+  add_foreign_key "label_priorities", "projects", on_delete: :cascade
+  add_foreign_key "labels", "namespaces", column: "group_id", on_delete: :cascade
   add_foreign_key "lists", "boards"
   add_foreign_key "lists", "labels"
   add_foreign_key "merge_request_metrics", "merge_requests", on_delete: :cascade
diff --git a/doc/user/project/settings/import_export.md b/doc/user/project/settings/import_export.md
index 65ed9fae4ec..dfc762fe1d3 100644
--- a/doc/user/project/settings/import_export.md
+++ b/doc/user/project/settings/import_export.md
@@ -22,7 +22,8 @@ with all their related data and be moved into a new GitLab instance.
 
 | GitLab version | Import/Export version |
 | -------- | -------- |
-| 8.12.0 to current  | 0.1.4    |
+| 8.13.0 to current  | 0.1.5    |
+| 8.12.0   | 0.1.4    |
 | 8.10.3   | 0.1.3    |
 | 8.10.0   | 0.1.2    |
 | 8.9.5    | 0.1.1    |
diff --git a/features/steps/project/issues/labels.rb b/features/steps/project/issues/labels.rb
index 2937d5d7ca8..f74a9b5df47 100644
--- a/features/steps/project/issues/labels.rb
+++ b/features/steps/project/issues/labels.rb
@@ -8,7 +8,7 @@ class Spinach::Features::ProjectIssuesLabels < Spinach::FeatureSteps
   end
 
   step 'I remove label \'bug\'' do
-    page.within "#label_#{bug_label.id}" do
+    page.within "#project_label_#{bug_label.id}" do
       first(:link, 'Delete').click
     end
   end
diff --git a/lib/api/boards.rb b/lib/api/boards.rb
index b14dd4f6e83..4ac491edc1b 100644
--- a/lib/api/boards.rb
+++ b/lib/api/boards.rb
@@ -65,8 +65,8 @@ module API
           requires :label_id, type: Integer, desc: 'The ID of an existing label'
         end
         post '/lists' do
-          unless user_project.labels.exists?(params[:label_id])
-            render_api_error!({ error: "Label not found!" }, 400)
+          unless available_labels.exists?(params[:label_id])
+            render_api_error!({ error: 'Label not found!' }, 400)
           end
 
           authorize!(:admin_list, user_project)
diff --git a/lib/api/helpers.rb b/lib/api/helpers.rb
index 67473f300c9..45120898b76 100644
--- a/lib/api/helpers.rb
+++ b/lib/api/helpers.rb
@@ -71,6 +71,10 @@ module API
       @project ||= find_project(params[:id])
     end
 
+    def available_labels
+      @available_labels ||= LabelsFinder.new(current_user, project_id: user_project.id).execute
+    end
+
     def find_project(id)
       project = Project.find_with_namespace(id) || Project.find_by(id: id)
 
@@ -118,7 +122,7 @@ module API
     end
 
     def find_project_label(id)
-      label = user_project.labels.find_by_id(id) || user_project.labels.find_by_title(id)
+      label = available_labels.find_by_id(id) || available_labels.find_by_title(id)
       label || not_found!('Label')
     end
 
@@ -197,16 +201,11 @@ module API
     def validate_label_params(params)
       errors = {}
 
-      if params[:labels].present?
-        params[:labels].split(',').each do |label_name|
-          label = user_project.labels.create_with(
-            color: Label::DEFAULT_COLOR).find_or_initialize_by(
-              title: label_name.strip)
+      params[:labels].to_s.split(',').each do |label_name|
+        label = available_labels.find_or_initialize_by(title: label_name.strip)
+        next if label.valid?
 
-          if label.invalid?
-            errors[label.title] = label.errors
-          end
-        end
+        errors[label.title] = label.errors
       end
 
       errors
diff --git a/lib/api/labels.rb b/lib/api/labels.rb
index c806829d69e..642e6345b9e 100644
--- a/lib/api/labels.rb
+++ b/lib/api/labels.rb
@@ -11,7 +11,7 @@ module API
       # Example Request:
       #   GET /projects/:id/labels
       get ':id/labels' do
-        present user_project.labels, with: Entities::Label, current_user: current_user
+        present available_labels, with: Entities::Label, current_user: current_user
       end
 
       # Creates a new label
diff --git a/lib/api/merge_requests.rb b/lib/api/merge_requests.rb
index 2b685621da9..bf8504e1101 100644
--- a/lib/api/merge_requests.rb
+++ b/lib/api/merge_requests.rb
@@ -86,14 +86,11 @@ module API
           render_api_error!({ labels: errors }, 400)
         end
 
+        attrs[:labels] = params[:labels] if params[:labels]
+
         merge_request = ::MergeRequests::CreateService.new(user_project, current_user, attrs).execute
 
         if merge_request.valid?
-          # Find or create labels and attach to issue
-          if params[:labels].present?
-            merge_request.add_labels_by_names(params[:labels].split(","))
-          end
-
           present merge_request, with: Entities::MergeRequest, current_user: current_user
         else
           handle_merge_request_errors! merge_request.errors
@@ -195,15 +192,11 @@ module API
             render_api_error!({ labels: errors }, 400)
           end
 
+          attrs[:labels] = params[:labels] if params[:labels]
+
           merge_request = ::MergeRequests::UpdateService.new(user_project, current_user, attrs).execute(merge_request)
 
           if merge_request.valid?
-            # Find or create labels and attach to issue
-            unless params[:labels].nil?
-              merge_request.remove_labels
-              merge_request.add_labels_by_names(params[:labels].split(","))
-            end
-
             present merge_request, with: Entities::MergeRequest, current_user: current_user
           else
             handle_merge_request_errors! merge_request.errors
diff --git a/lib/banzai/filter/label_reference_filter.rb b/lib/banzai/filter/label_reference_filter.rb
index 8f262ef3d8d..c24831e68ee 100644
--- a/lib/banzai/filter/label_reference_filter.rb
+++ b/lib/banzai/filter/label_reference_filter.rb
@@ -9,7 +9,7 @@ module Banzai
       end
 
       def find_object(project, id)
-        project.labels.find(id)
+        find_labels(project).find(id)
       end
 
       def self.references_in(text, pattern = Label.reference_pattern)
@@ -35,7 +35,11 @@ module Banzai
         return unless project
 
         label_params = label_params(label_id, label_name)
-        project.labels.find_by(label_params)
+        find_labels(project).find_by(label_params)
+      end
+
+      def find_labels(project)
+        LabelsFinder.new(nil, project_id: project.id).execute(authorized_only: false)
       end
 
       # Parameters to pass to `Label.find_by` based on the given arguments
@@ -60,13 +64,50 @@ module Banzai
       end
 
       def object_link_text(object, matches)
-        if context[:project] == object.project
-          LabelsHelper.render_colored_label(object)
+        if same_group?(object) && namespace_match?(matches)
+          render_same_project_label(object)
+        elsif same_project?(object)
+          render_same_project_label(object)
         else
-          LabelsHelper.render_colored_cross_project_label(object)
+          render_cross_project_label(object, matches)
         end
       end
 
+      def same_group?(object)
+        object.is_a?(GroupLabel) && object.group == project.group
+      end
+
+      def namespace_match?(matches)
+        matches[:project].blank? || matches[:project] == project.path_with_namespace
+      end
+
+      def same_project?(object)
+        object.is_a?(ProjectLabel) && object.project == project
+      end
+
+      def user
+        context[:current_user] || context[:author]
+      end
+
+      def project
+        context[:project]
+      end
+
+      def render_same_project_label(object)
+        LabelsHelper.render_colored_label(object)
+      end
+
+      def render_cross_project_label(object, matches)
+        source_project =
+          if matches[:project]
+            Project.find_with_namespace(matches[:project])
+          else
+            object.project
+          end
+
+        LabelsHelper.render_colored_cross_project_label(object, source_project)
+      end
+
       def unescape_html_entities(text)
         CGI.unescapeHTML(text.to_s)
       end
diff --git a/lib/gitlab/fogbugz_import/importer.rb b/lib/gitlab/fogbugz_import/importer.rb
index 501d5a95547..65ee85ca5a9 100644
--- a/lib/gitlab/fogbugz_import/importer.rb
+++ b/lib/gitlab/fogbugz_import/importer.rb
@@ -74,8 +74,8 @@ module Gitlab
       end
 
       def create_label(name)
-        color = nice_label_color(name)
-        Label.create!(project_id: project.id, title: name, color: color)
+        params = { title: name, color: nice_label_color(name) }
+        ::Labels::FindOrCreateService.new(project.owner, project, params).execute
       end
 
       def user_info(person_id)
@@ -122,25 +122,21 @@ module Gitlab
           author_id = user_info(bug['ixPersonOpenedBy'])[:gitlab_id] || project.creator_id
 
           issue = Issue.create!(
-            project_id:   project.id,
-            title:        bug['sTitle'],
-            description:  body,
-            author_id:    author_id,
-            assignee_id:  assignee_id,
-            state:        bug['fOpen'] == 'true' ? 'opened' : 'closed'
+            iid:         bug['ixBug'],
+            project_id:  project.id,
+            title:       bug['sTitle'],
+            description: body,
+            author_id:   author_id,
+            assignee_id: assignee_id,
+            state:       bug['fOpen'] == 'true' ? 'opened' : 'closed',
+            created_at:  date,
+            updated_at:  DateTime.parse(bug['dtLastUpdated'])
           )
-          issue.add_labels_by_names(labels)
 
-          if issue.iid != bug['ixBug']
-            issue.update_attribute(:iid, bug['ixBug'])
-          end
+          issue_labels = ::LabelsFinder.new(project.owner, project_id: project.id, title: labels).execute
+          issue.update_attribute(:label_ids, issue_labels.pluck(:id))
 
           import_issue_comments(issue, comments)
-
-          issue.update_attribute(:created_at, date)
-
-          last_update = DateTime.parse(bug['dtLastUpdated'])
-          issue.update_attribute(:updated_at, last_update)
         end
       end
 
diff --git a/lib/gitlab/gfm/reference_rewriter.rb b/lib/gitlab/gfm/reference_rewriter.rb
index 78d7a4f27cf..a7c596dced0 100644
--- a/lib/gitlab/gfm/reference_rewriter.rb
+++ b/lib/gitlab/gfm/reference_rewriter.rb
@@ -58,7 +58,7 @@ module Gitlab
         referable = find_referable(reference)
         return reference unless referable
 
-        cross_reference = referable.to_reference(target_project)
+        cross_reference = build_cross_reference(referable, target_project)
         return reference if reference == cross_reference
 
         new_text = before + cross_reference + after
@@ -72,6 +72,14 @@ module Gitlab
         extractor.all.first
       end
 
+      def build_cross_reference(referable, target_project)
+        if referable.respond_to?(:project)
+          referable.to_reference(target_project)
+        else
+          referable.to_reference(@source_project, target_project)
+        end
+      end
+
       def substitution_valid?(substituted)
         @original_html == markdown(substituted)
       end
diff --git a/lib/gitlab/github_import/label_formatter.rb b/lib/gitlab/github_import/label_formatter.rb
index 2cad7fca88e..942dfb3312b 100644
--- a/lib/gitlab/github_import/label_formatter.rb
+++ b/lib/gitlab/github_import/label_formatter.rb
@@ -14,9 +14,13 @@ module Gitlab
       end
 
       def create!
-        project.labels.find_or_create_by!(title: title) do |label|
-          label.color = color
-        end
+        params  = attributes.except(:project)
+        service = ::Labels::FindOrCreateService.new(project.owner, project, params)
+        label   = service.execute
+
+        raise ActiveRecord::RecordInvalid.new(label) unless label.persisted?
+
+        label
       end
 
       private
diff --git a/lib/gitlab/google_code_import/importer.rb b/lib/gitlab/google_code_import/importer.rb
index 62da327931f..6a68e786b4f 100644
--- a/lib/gitlab/google_code_import/importer.rb
+++ b/lib/gitlab/google_code_import/importer.rb
@@ -92,19 +92,17 @@ module Gitlab
           end
 
           issue = Issue.create!(
-            project_id:   project.id,
-            title:        raw_issue["title"],
-            description:  body,
-            author_id:    project.creator_id,
-            assignee_id:  assignee_id,
-            state:        raw_issue["state"] == "closed" ? "closed" : "opened"
+            iid:         raw_issue['id'],
+            project_id:  project.id,
+            title:       raw_issue['title'],
+            description: body,
+            author_id:   project.creator_id,
+            assignee_id: assignee_id,
+            state:       raw_issue['state'] == 'closed' ? 'closed' : 'opened'
           )
 
-          issue.add_labels_by_names(labels)
-
-          if issue.iid != raw_issue["id"]
-            issue.update_attribute(:iid, raw_issue["id"])
-          end
+          issue_labels = ::LabelsFinder.new(project.owner, project_id: project.id, title: labels).execute
+          issue.update_attribute(:label_ids, issue_labels.pluck(:id))
 
           import_issue_comments(issue, comments)
         end
@@ -236,8 +234,8 @@ module Gitlab
       end
 
       def create_label(name)
-        color = nice_label_color(name)
-        Label.create!(project_id: project.id, name: name, color: color)
+        params = { name: name, color: nice_label_color(name) }
+        ::Labels::FindOrCreateService.new(project.owner, project, params).execute
       end
 
       def format_content(raw_content)
diff --git a/lib/gitlab/import_export.rb b/lib/gitlab/import_export.rb
index 181e288a014..eb667a85b78 100644
--- a/lib/gitlab/import_export.rb
+++ b/lib/gitlab/import_export.rb
@@ -3,7 +3,7 @@ module Gitlab
     extend self
 
     # For every version update, the version history in import_export.md has to be kept up to date.
-    VERSION = '0.1.4'
+    VERSION = '0.1.5'
     FILENAME_LIMIT = 50
 
     def export_path(relative_path:)
diff --git a/lib/gitlab/import_export/attribute_cleaner.rb b/lib/gitlab/import_export/attribute_cleaner.rb
index b9e4042220a..f755a404693 100644
--- a/lib/gitlab/import_export/attribute_cleaner.rb
+++ b/lib/gitlab/import_export/attribute_cleaner.rb
@@ -1,7 +1,7 @@
 module Gitlab
   module ImportExport
     class AttributeCleaner
-      ALLOWED_REFERENCES = RelationFactory::PROJECT_REFERENCES + RelationFactory::USER_REFERENCES
+      ALLOWED_REFERENCES = RelationFactory::PROJECT_REFERENCES + RelationFactory::USER_REFERENCES + ['group_id']
 
       def self.clean!(relation_hash:)
         relation_hash.reject! do |key, _value|
diff --git a/lib/gitlab/import_export/import_export.yml b/lib/gitlab/import_export/import_export.yml
index bb9d1080330..e6ecd118609 100644
--- a/lib/gitlab/import_export/import_export.yml
+++ b/lib/gitlab/import_export/import_export.yml
@@ -1,6 +1,7 @@
 # Model relationships to be included in the project import/export
 project_tree:
-  - :labels
+  - labels:
+      :priorities
   - milestones:
     - :events
   - issues:
@@ -9,7 +10,8 @@ project_tree:
       - :author
       - :events
     - label_links:
-      - :label
+      - label:
+          :priorities
     - milestone:
       - :events
   - snippets:
@@ -26,7 +28,8 @@ project_tree:
     - :merge_request_diff
     - :events
     - label_links:
-      - :label
+      - label:
+          :priorities
     - milestone:
       - :events
   - pipelines:
@@ -71,6 +74,10 @@ excluded_attributes:
     - :awardable_id
 
 methods:
+  labels:
+    - :type
+  label:
+    - :type
   statuses:
     - :type
   services:
diff --git a/lib/gitlab/import_export/json_hash_builder.rb b/lib/gitlab/import_export/json_hash_builder.rb
index 0cc10f40087..48c09dafcb6 100644
--- a/lib/gitlab/import_export/json_hash_builder.rb
+++ b/lib/gitlab/import_export/json_hash_builder.rb
@@ -65,11 +65,17 @@ module Gitlab
       # +value+ existing model to be included in the hash
       # +parsed_hash+ the original hash
       def parse_hash(value)
+        return nil if already_contains_methods?(value)
+
         @attributes_finder.parse(value) do |hash|
           { include: hash_or_merge(value, hash) }
         end
       end
 
+      def already_contains_methods?(value)
+        value.is_a?(Hash) && value.values.detect { |val| val[:methods]}
+      end
+
       # Adds new model configuration to an existing hash with key +current_key+
       # It may include exceptions or other attribute detail configuration, parsed by +@attributes_finder+
       #
diff --git a/lib/gitlab/import_export/project_tree_restorer.rb b/lib/gitlab/import_export/project_tree_restorer.rb
index 5a109f24f9f..7cdba880a93 100644
--- a/lib/gitlab/import_export/project_tree_restorer.rb
+++ b/lib/gitlab/import_export/project_tree_restorer.rb
@@ -110,7 +110,7 @@ module Gitlab
       def create_relation(relation, relation_hash_list)
         relation_array = [relation_hash_list].flatten.map do |relation_hash|
           Gitlab::ImportExport::RelationFactory.create(relation_sym: relation.to_sym,
-                                                       relation_hash: relation_hash,
+                                                       relation_hash: parsed_relation_hash(relation_hash),
                                                        members_mapper: members_mapper,
                                                        user: @user,
                                                        project_id: restored_project.id)
@@ -118,6 +118,10 @@ module Gitlab
 
         relation_hash_list.is_a?(Array) ? relation_array : relation_array.first
       end
+
+      def parsed_relation_hash(relation_hash)
+        relation_hash.merge!('group_id' => restored_project.group.try(:id), 'project_id' => restored_project.id)
+      end
     end
   end
 end
diff --git a/lib/gitlab/import_export/relation_factory.rb b/lib/gitlab/import_export/relation_factory.rb
index 9300f789e1b..dc630e76411 100644
--- a/lib/gitlab/import_export/relation_factory.rb
+++ b/lib/gitlab/import_export/relation_factory.rb
@@ -9,7 +9,10 @@ module Gitlab
                     builds: 'Ci::Build',
                     hooks: 'ProjectHook',
                     merge_access_levels: 'ProtectedBranch::MergeAccessLevel',
-                    push_access_levels: 'ProtectedBranch::PushAccessLevel' }.freeze
+                    push_access_levels: 'ProtectedBranch::PushAccessLevel',
+                    labels: :project_labels,
+                    priorities: :label_priorities,
+                    label: :project_label }.freeze
 
       USER_REFERENCES = %w[author_id assignee_id updated_by_id user_id].freeze
 
@@ -19,9 +22,7 @@ module Gitlab
 
       IMPORTED_OBJECT_MAX_RETRIES = 5.freeze
 
-      EXISTING_OBJECT_CHECK = %i[milestone milestones label labels].freeze
-
-      FINDER_ATTRIBUTES = %w[title project_id].freeze
+      EXISTING_OBJECT_CHECK = %i[milestone milestones label labels project_label project_labels project_label group_label].freeze
 
       def self.create(*args)
         new(*args).create
@@ -56,6 +57,8 @@ module Gitlab
 
         update_user_references
         update_project_references
+
+        handle_group_label if group_label?
         reset_ci_tokens if @relation_name == 'Ci::Trigger'
         @relation_hash['data'].deep_symbolize_keys! if @relation_name == :events && @relation_hash['data']
         set_st_diffs if @relation_name == :merge_request_diff
@@ -123,6 +126,20 @@ module Gitlab
         @relation_hash['target_project_id'] && @relation_hash['target_project_id'] == @relation_hash['source_project_id']
       end
 
+      def group_label?
+        @relation_hash['type'] == 'GroupLabel'
+      end
+
+      def handle_group_label
+        # If there's no group, move the label to a project label
+        if @relation_hash['group_id']
+          @relation_hash['project_id'] = nil
+          @relation_name = :group_label
+        else
+          @relation_hash['type'] = 'ProjectLabel'
+        end
+      end
+
       def reset_ci_tokens
         return unless Gitlab::ImportExport.reset_tokens?
 
@@ -171,11 +188,9 @@ module Gitlab
         # Otherwise always create the record, skipping the extra SELECT clause.
         @existing_or_new_object ||= begin
           if EXISTING_OBJECT_CHECK.include?(@relation_name)
-            events = parsed_relation_hash.delete('events')
+            attribute_hash = attribute_hash_for(['events', 'priorities'])
 
-            unless events.blank?
-              existing_object.assign_attributes(events: events)
-            end
+            existing_object.assign_attributes(attribute_hash) if attribute_hash.any?
 
             existing_object
           else
@@ -184,14 +199,22 @@ module Gitlab
         end
       end
 
+      def attribute_hash_for(attributes)
+        attributes.inject({}) do |hash, value|
+          hash[value] = parsed_relation_hash.delete(value) if parsed_relation_hash[value]
+          hash
+        end
+      end
+
       def existing_object
         @existing_object ||=
           begin
-            finder_hash = parsed_relation_hash.slice(*FINDER_ATTRIBUTES)
+            finder_attributes = @relation_name == :group_label ? %w[title group_id] : %w[title project_id]
+            finder_hash = parsed_relation_hash.slice(*finder_attributes)
             existing_object = relation_class.find_or_create_by(finder_hash)
             # Done in two steps, as MySQL behaves differently than PostgreSQL using
             # the +find_or_create_by+ method and does not return the ID the second time.
-            existing_object.update(parsed_relation_hash)
+            existing_object.update!(parsed_relation_hash)
             existing_object
           end
       end
diff --git a/lib/gitlab/issues_labels.rb b/lib/gitlab/issues_labels.rb
index 1bec6088292..01a2c19ab23 100644
--- a/lib/gitlab/issues_labels.rb
+++ b/lib/gitlab/issues_labels.rb
@@ -18,8 +18,8 @@ module Gitlab
           { title: "enhancement", color: green }
         ]
 
-        labels.each do |label|
-          project.labels.create(label)
+        labels.each do |params|
+          ::Labels::FindOrCreateService.new(project.owner, project).execute(params)
         end
       end
     end
diff --git a/spec/controllers/projects/labels_controller_spec.rb b/spec/controllers/projects/labels_controller_spec.rb
index 3492b6ffbbb..622ab154493 100644
--- a/spec/controllers/projects/labels_controller_spec.rb
+++ b/spec/controllers/projects/labels_controller_spec.rb
@@ -1,52 +1,73 @@
 require 'spec_helper'
 
 describe Projects::LabelsController do
-  let(:project) { create(:project) }
+  let(:group)   { create(:group) }
+  let(:project) { create(:project, namespace: group) }
   let(:user)    { create(:user) }
 
   before do
     project.team << [user, :master]
+
     sign_in(user)
   end
 
   describe 'GET #index' do
-    def create_label(attributes)
-      create(:label, attributes.merge(project: project))
-    end
+    let!(:label_1) { create(:label, project: project, priority: 1, title: 'Label 1') }
+    let!(:label_2) { create(:label, project: project, priority: 3, title: 'Label 2') }
+    let!(:label_3) { create(:label, project: project, priority: 1, title: 'Label 3') }
+    let!(:label_4) { create(:label, project: project, title: 'Label 4') }
+    let!(:label_5) { create(:label, project: project, title: 'Label 5') }
 
-    before do
-      15.times { |i| create_label(priority: (i % 3) + 1, title: "label #{15 - i}") }
-      5.times { |i| create_label(title: "label #{100 - i}") }
+    let!(:group_label_1) { create(:group_label, group: group, title: 'Group Label 1') }
+    let!(:group_label_2) { create(:group_label, group: group, title: 'Group Label 2') }
+    let!(:group_label_3) { create(:group_label, group: group, title: 'Group Label 3') }
+    let!(:group_label_4) { create(:group_label, group: group, title: 'Group Label 4') }
 
-      get :index, namespace_id: project.namespace.to_param, project_id: project.to_param
+    before do
+      create(:label_priority, project: project, label: group_label_1, priority: 3)
+      create(:label_priority, project: project, label: group_label_2, priority: 1)
     end
 
     context '@prioritized_labels' do
-      let(:prioritized_labels) { assigns(:prioritized_labels) }
+      before do
+        list_labels
+      end
+
+      it 'does not include labels without priority' do
+        list_labels
 
-      it 'contains only prioritized labels' do
-        expect(prioritized_labels).to all(have_attributes(priority: a_value > 0))
+        expect(assigns(:prioritized_labels)).not_to include(group_label_3, group_label_4, label_4, label_5)
       end
 
       it 'is sorted by priority, then label title' do
-        priorities_and_titles = prioritized_labels.pluck(:priority, :title)
-
-        expect(priorities_and_titles.sort).to eq(priorities_and_titles)
+        expect(assigns(:prioritized_labels)).to eq [group_label_2, label_1, label_3, group_label_1, label_2]
       end
     end
 
     context '@labels' do
-      let(:labels) { assigns(:labels) }
+      it 'is sorted by label title' do
+        list_labels
 
-      it 'contains only unprioritized labels' do
-        expect(labels).to all(have_attributes(priority: nil))
+        expect(assigns(:labels)).to eq [group_label_3, group_label_4, label_4, label_5]
       end
 
-      it 'is sorted by label title' do
-        titles = labels.pluck(:title)
+      it 'does not include labels with priority' do
+        list_labels
+
+        expect(assigns(:labels)).not_to include(group_label_2, label_1, label_3, group_label_1, label_2)
+      end
+
+      it 'does not include group labels when project does not belong to a group' do
+        project.update(namespace: create(:namespace))
 
-        expect(titles.sort).to eq(titles)
+        list_labels
+
+        expect(assigns(:labels)).not_to include(group_label_3, group_label_4)
       end
     end
+
+    def list_labels
+      get :index, namespace_id: project.namespace.to_param, project_id: project.to_param
+    end
   end
 end
diff --git a/spec/factories/label_priorities.rb b/spec/factories/label_priorities.rb
new file mode 100644
index 00000000000..f25939d2d3e
--- /dev/null
+++ b/spec/factories/label_priorities.rb
@@ -0,0 +1,7 @@
+FactoryGirl.define do
+  factory :label_priority do
+    project factory: :empty_project
+    label
+    sequence(:priority)
+  end
+end
diff --git a/spec/factories/labels.rb b/spec/factories/labels.rb
index eb489099854..3e8822faf97 100644
--- a/spec/factories/labels.rb
+++ b/spec/factories/labels.rb
@@ -1,7 +1,23 @@
 FactoryGirl.define do
-  factory :label do
+  factory :label, class: ProjectLabel do
     sequence(:title) { |n| "label#{n}" }
     color "#990000"
     project
+
+    transient do
+      priority nil
+    end
+
+    after(:create) do |label, evaluator|
+      if evaluator.priority
+        label.priorities.create(project: label.project, priority: evaluator.priority)
+      end
+    end
+  end
+
+  factory :group_label, class: GroupLabel do
+    sequence(:title) { |n| "label#{n}" }
+    color "#990000"
+    group
   end
 end
diff --git a/spec/factories/merge_requests.rb b/spec/factories/merge_requests.rb
index c6a08d78b78..f780e01253c 100644
--- a/spec/factories/merge_requests.rb
+++ b/spec/factories/merge_requests.rb
@@ -68,5 +68,15 @@ FactoryGirl.define do
     factory :closed_merge_request, traits: [:closed]
     factory :reopened_merge_request, traits: [:reopened]
     factory :merge_request_with_diffs, traits: [:with_diffs]
+
+    factory :labeled_merge_request do
+      transient do
+        labels []
+      end
+
+      after(:create) do |merge_request, evaluator|
+        merge_request.update_attributes(labels: evaluator.labels)
+      end
+    end
   end
 end
diff --git a/spec/features/projects/import_export/test_project_export.tar.gz b/spec/features/projects/import_export/test_project_export.tar.gz
index d04bdea0fe4..bfe59bdb90e 100644
--- a/spec/features/projects/import_export/test_project_export.tar.gz
+++ b/spec/features/projects/import_export/test_project_export.tar.gz
diff --git a/spec/features/projects/labels/update_prioritization_spec.rb b/spec/features/projects/labels/update_prioritization_spec.rb
index cb7495da8eb..c9fa8315e79 100644
--- a/spec/features/projects/labels/update_prioritization_spec.rb
+++ b/spec/features/projects/labels/update_prioritization_spec.rb
@@ -3,18 +3,56 @@ require 'spec_helper'
 feature 'Prioritize labels', feature: true do
   include WaitForAjax
 
-  context 'when project belongs to user' do
-    let(:user)    { create(:user) }
-    let(:project) { create(:project, name: 'test', namespace: user.namespace) }
+  let(:user)     { create(:user) }
+  let(:group)    { create(:group) }
+  let(:project)  { create(:empty_project, :public, namespace: group) }
+  let!(:bug)     { create(:label, project: project, title: 'bug') }
+  let!(:wontfix) { create(:label, project: project, title: 'wontfix') }
+  let!(:feature) { create(:group_label, group: group, title: 'feature') }
 
-    scenario 'user can prioritize a label', js: true do
-      bug     = create(:label, title: 'bug')
-      wontfix = create(:label, title: 'wontfix')
-
-      project.labels << bug
-      project.labels << wontfix
+  context 'when user belongs to project team' do
+    before do
+      project.team << [user, :developer]
 
       login_as user
+    end
+
+    scenario 'user can prioritize a group label', js: true do
+      visit namespace_project_labels_path(project.namespace, project)
+
+      expect(page).to have_content('No prioritized labels yet')
+
+      page.within('.other-labels') do
+        all('.js-toggle-priority')[1].click
+        wait_for_ajax
+        expect(page).not_to have_content('feature')
+      end
+
+      page.within('.prioritized-labels') do
+        expect(page).not_to have_content('No prioritized labels yet')
+        expect(page).to have_content('feature')
+      end
+    end
+
+    scenario 'user can unprioritize a group label', js: true do
+      create(:label_priority, project: project, label: feature, priority: 1)
+
+      visit namespace_project_labels_path(project.namespace, project)
+
+      page.within('.prioritized-labels') do
+        expect(page).to have_content('feature')
+
+        first('.js-toggle-priority').click
+        wait_for_ajax
+        expect(page).not_to have_content('bug')
+      end
+
+      page.within('.other-labels') do
+        expect(page).to have_content('feature')
+      end
+    end
+
+    scenario 'user can prioritize a project label', js: true do
       visit namespace_project_labels_path(project.namespace, project)
 
       expect(page).to have_content('No prioritized labels yet')
@@ -31,19 +69,14 @@ feature 'Prioritize labels', feature: true do
       end
     end
 
-    scenario 'user can unprioritize a label', js: true do
-      bug     = create(:label, title: 'bug', priority: 1)
-      wontfix = create(:label, title: 'wontfix')
-
-      project.labels << bug
-      project.labels << wontfix
+    scenario 'user can unprioritize a project label', js: true do
+      create(:label_priority, project: project, label: bug, priority: 1)
 
-      login_as user
       visit namespace_project_labels_path(project.namespace, project)
 
-      expect(page).to have_content('bug')
-
       page.within('.prioritized-labels') do
+        expect(page).to have_content('bug')
+
         first('.js-toggle-priority').click
         wait_for_ajax
         expect(page).not_to have_content('bug')
@@ -56,23 +89,20 @@ feature 'Prioritize labels', feature: true do
     end
 
     scenario 'user can sort prioritized labels and persist across reloads', js: true do
-      bug     = create(:label, title: 'bug', priority: 1)
-      wontfix = create(:label, title: 'wontfix', priority: 2)
-
-      project.labels << bug
-      project.labels << wontfix
+      create(:label_priority, project: project, label: bug, priority: 1)
+      create(:label_priority, project: project, label: feature, priority: 2)
 
-      login_as user
       visit namespace_project_labels_path(project.namespace, project)
 
       expect(page).to have_content 'bug'
+      expect(page).to have_content 'feature'
       expect(page).to have_content 'wontfix'
 
       # Sort labels
-      find("#label_#{bug.id}").drag_to find("#label_#{wontfix.id}")
+      find("#project_label_#{bug.id}").drag_to find("#group_label_#{feature.id}")
 
       page.within('.prioritized-labels') do
-        expect(first('li')).to have_content('wontfix')
+        expect(first('li')).to have_content('feature')
         expect(page.all('li').last).to have_content('bug')
       end
 
@@ -80,7 +110,7 @@ feature 'Prioritize labels', feature: true do
       wait_for_ajax
 
       page.within('.prioritized-labels') do
-        expect(first('li')).to have_content('wontfix')
+        expect(first('li')).to have_content('feature')
         expect(page.all('li').last).to have_content('bug')
       end
     end
@@ -88,28 +118,26 @@ feature 'Prioritize labels', feature: true do
 
   context 'as a guest' do
     it 'does not prioritize labels' do
-      user = create(:user)
       guest = create(:user)
-      project = create(:project, name: 'test', namespace: user.namespace)
-
-      create(:label, title: 'bug')
 
       login_as guest
+
       visit namespace_project_labels_path(project.namespace, project)
 
+      expect(page).to have_content 'bug'
+      expect(page).to have_content 'wontfix'
+      expect(page).to have_content 'feature'
       expect(page).not_to have_css('.prioritized-labels')
     end
   end
 
   context 'as a non signed in user' do
     it 'does not prioritize labels' do
-      user = create(:user)
-      project = create(:project, name: 'test', namespace: user.namespace)
-
-      create(:label, title: 'bug')
-
       visit namespace_project_labels_path(project.namespace, project)
 
+      expect(page).to have_content 'bug'
+      expect(page).to have_content 'wontfix'
+      expect(page).to have_content 'feature'
       expect(page).not_to have_css('.prioritized-labels')
     end
   end
diff --git a/spec/finders/labels_finder_spec.rb b/spec/finders/labels_finder_spec.rb
new file mode 100644
index 00000000000..27acc464ea2
--- /dev/null
+++ b/spec/finders/labels_finder_spec.rb
@@ -0,0 +1,69 @@
+require 'spec_helper'
+
+describe LabelsFinder do
+  describe '#execute' do
+    let(:group_1) { create(:group) }
+    let(:group_2) { create(:group) }
+    let(:group_3) { create(:group) }
+
+    let(:project_1) { create(:empty_project, namespace: group_1) }
+    let(:project_2) { create(:empty_project, namespace: group_2) }
+    let(:project_3) { create(:empty_project) }
+    let(:project_4) { create(:empty_project, :public) }
+    let(:project_5) { create(:empty_project, namespace: group_1) }
+
+    let!(:project_label_1) { create(:label, project: project_1, title: 'Label 1') }
+    let!(:project_label_2) { create(:label, project: project_2, title: 'Label 2') }
+    let!(:project_label_4) { create(:label, project: project_4, title: 'Label 4') }
+    let!(:project_label_5) { create(:label, project: project_5, title: 'Label 5') }
+
+    let!(:group_label_1) { create(:group_label, group: group_1, title: 'Label 1') }
+    let!(:group_label_2) { create(:group_label, group: group_1, title: 'Group Label 2') }
+    let!(:group_label_3) { create(:group_label, group: group_2, title: 'Group Label 3') }
+
+    let(:user) { create(:user) }
+
+    before do
+      create(:label, project: project_3, title: 'Label 3')
+      create(:group_label, group: group_3, title: 'Group Label 4')
+
+      project_1.team << [user, :developer]
+    end
+
+    context 'with no filter' do
+      it 'returns labels from projects the user have access' do
+        group_2.add_developer(user)
+
+        finder = described_class.new(user)
+
+        expect(finder.execute).to eq [group_label_2, group_label_3, project_label_1, group_label_1, project_label_2, project_label_4]
+      end
+    end
+
+    context 'filtering by group_id' do
+      it 'returns labels available for any project within the group' do
+        group_1.add_developer(user)
+
+        finder = described_class.new(user, group_id: group_1.id)
+
+        expect(finder.execute).to eq [group_label_2, project_label_1, group_label_1, project_label_5]
+      end
+    end
+
+    context 'filtering by project_id' do
+      it 'returns labels available for the project' do
+        finder = described_class.new(user, project_id: project_1.id)
+
+        expect(finder.execute).to eq [group_label_2, project_label_1, group_label_1]
+      end
+    end
+
+    context 'filtering by title' do
+      it 'returns label with that title' do
+        finder = described_class.new(user, title: 'Group Label 2')
+
+        expect(finder.execute).to eq [group_label_2]
+      end
+    end
+  end
+end
diff --git a/spec/fixtures/api/schemas/list.json b/spec/fixtures/api/schemas/list.json
index f070fa3b254..8d94cf26ecb 100644
--- a/spec/fixtures/api/schemas/list.json
+++ b/spec/fixtures/api/schemas/list.json
@@ -13,7 +13,7 @@
       "enum": ["backlog", "label", "done"]
     },
     "label": {
-      "type": ["object"],
+      "type": ["object", "null"],
       "required": [
         "id",
         "color",
diff --git a/spec/helpers/labels_helper_spec.rb b/spec/helpers/labels_helper_spec.rb
index 501f150cfda..d30daf47543 100644
--- a/spec/helpers/labels_helper_spec.rb
+++ b/spec/helpers/labels_helper_spec.rb
@@ -5,27 +5,26 @@ describe LabelsHelper do
     let(:project) { create(:empty_project) }
     let(:label) { create(:label, project: project) }
 
-    context 'with @project set' do
-      before do
-        @project = project
-      end
-
-      it 'uses the instance variable' do
-        expect(link_to_label(label)).to match %r{<a href="/#{@project.to_reference}/issues\?label_name%5B%5D=#{label.name}"><span class="[\w\s\-]*has-tooltip".*</span></a>}
+    context 'without subject' do
+      it "uses the label's project" do
+        expect(link_to_label(label)).to match %r{<a href="/#{label.project.to_reference}/issues\?label_name%5B%5D=#{label.name}">.*</a>}
       end
     end
 
-    context 'without @project set' do
-      it "uses the label's project" do
-        expect(link_to_label(label)).to match %r{<a href="/#{label.project.to_reference}/issues\?label_name%5B%5D=#{label.name}">.*</a>}
+    context 'with a project as subject' do
+      let(:namespace) { build(:namespace, name: 'foo3') }
+      let(:another_project) { build(:empty_project, namespace: namespace, name: 'bar3') }
+
+      it 'links to project issues page' do
+        expect(link_to_label(label, subject: another_project)).to match %r{<a href="/foo3/bar3/issues\?label_name%5B%5D=#{label.name}">.*</a>}
       end
     end
 
-    context 'with a project argument' do
-      let(:another_project) { double('project', namespace: 'foo3', to_param: 'bar3') }
+    context 'with a group as subject' do
+      let(:group) { build(:group, name: 'bar') }
 
-      it 'links to merge requests page' do
-        expect(link_to_label(label, project: another_project)).to match %r{<a href="/foo3/bar3/issues\?label_name%5B%5D=#{label.name}">.*</a>}
+      it 'links to group issues page' do
+        expect(link_to_label(label, subject: group)).to match %r{<a href="/groups/bar/issues\?label_name%5B%5D=#{label.name}">.*</a>}
       end
     end
 
diff --git a/spec/lib/banzai/filter/label_reference_filter_spec.rb b/spec/lib/banzai/filter/label_reference_filter_spec.rb
index 908ccebbf87..9c09f00ae8a 100644
--- a/spec/lib/banzai/filter/label_reference_filter_spec.rb
+++ b/spec/lib/banzai/filter/label_reference_filter_spec.rb
@@ -305,6 +305,58 @@ describe Banzai::Filter::LabelReferenceFilter, lib: true do
     end
   end
 
+  describe 'group label references' do
+    let(:group)       { create(:group) }
+    let(:project)     { create(:empty_project, :public, namespace: group) }
+    let(:group_label) { create(:group_label, name: 'gfm references', group: group) }
+
+    context 'without project reference' do
+      let(:reference) { group_label.to_reference(format: :name) }
+
+      it 'links to a valid reference' do
+        doc = reference_filter("See #{reference}", project: project)
+
+        expect(doc.css('a').first.attr('href')).to eq urls.
+          namespace_project_issues_url(project.namespace, project, label_name: group_label.name)
+        expect(doc.text).to eq 'See gfm references'
+      end
+
+      it 'links with adjacent text' do
+        doc = reference_filter("Label (#{reference}.)")
+        expect(doc.to_html).to match(%r(\(<a.+><span.+>#{group_label.name}</span></a>\.\)))
+      end
+
+      it 'ignores invalid label names' do
+        exp = act = %(Label #{Label.reference_prefix}"#{group_label.name.reverse}")
+
+        expect(reference_filter(act).to_html).to eq exp
+      end
+    end
+
+    context 'with project reference' do
+      let(:reference) { project.to_reference + group_label.to_reference(format: :name) }
+
+      it 'links to a valid reference' do
+        doc = reference_filter("See #{reference}", project: project)
+
+        expect(doc.css('a').first.attr('href')).to eq urls.
+          namespace_project_issues_url(project.namespace, project, label_name: group_label.name)
+        expect(doc.text).to eq 'See gfm references'
+      end
+
+      it 'links with adjacent text' do
+        doc = reference_filter("Label (#{reference}.)")
+        expect(doc.to_html).to match(%r(\(<a.+><span.+>#{group_label.name}</span></a>\.\)))
+      end
+
+      it 'ignores invalid label names' do
+        exp = act = %(Label #{project.to_reference}#{Label.reference_prefix}"#{group_label.name.reverse}")
+
+        expect(reference_filter(act).to_html).to eq exp
+      end
+    end
+  end
+
   describe 'cross project label references' do
     context 'valid project referenced' do
       let(:another_project)  { create(:empty_project, :public) }
@@ -339,4 +391,34 @@ describe Banzai::Filter::LabelReferenceFilter, lib: true do
       end
     end
   end
+
+  describe 'cross group label references' do
+    context 'valid project referenced' do
+      let(:group) { create(:group) }
+      let(:project) { create(:empty_project, :public, namespace: group) }
+      let(:another_group) { create(:group) }
+      let(:another_project)  { create(:empty_project, :public, namespace: another_group) }
+      let(:project_name) { another_project.name_with_namespace }
+      let(:group_label) { create(:group_label, group: another_group, color: '#00ff00') }
+      let(:reference) { another_project.to_reference + group_label.to_reference }
+
+      let!(:result) { reference_filter("See #{reference}", project: project) }
+
+      it 'points to referenced project issues page' do
+        expect(result.css('a').first.attr('href'))
+          .to eq urls.namespace_project_issues_url(another_project.namespace,
+                                                   another_project,
+                                                   label_name: group_label.name)
+      end
+
+      it 'has valid color' do
+        expect(result.css('a span').first.attr('style'))
+          .to match /background-color: #00ff00/
+      end
+
+      it 'contains cross project content' do
+        expect(result.css('a').first.text).to eq "#{group_label.name} in #{project_name}"
+      end
+    end
+  end
 end
diff --git a/spec/lib/gitlab/gfm/reference_rewriter_spec.rb b/spec/lib/gitlab/gfm/reference_rewriter_spec.rb
index 0af249d8690..f045463c1cb 100644
--- a/spec/lib/gitlab/gfm/reference_rewriter_spec.rb
+++ b/spec/lib/gitlab/gfm/reference_rewriter_spec.rb
@@ -2,8 +2,8 @@ require 'spec_helper'
 
 describe Gitlab::Gfm::ReferenceRewriter do
   let(:text) { 'some text' }
-  let(:old_project) { create(:project) }
-  let(:new_project) { create(:project) }
+  let(:old_project) { create(:project, name: 'old') }
+  let(:new_project) { create(:project, name: 'new') }
   let(:user) { create(:user) }
 
   before { old_project.team << [user, :guest] }
@@ -62,7 +62,7 @@ describe Gitlab::Gfm::ReferenceRewriter do
           it { is_expected.to eq "#{ref}, `#1`, #{ref}, `#1`" }
         end
 
-        context 'description with labels' do
+        context 'description with project labels' do
           let!(:label) { create(:label, id: 123, name: 'test', project: old_project) }
           let(:project_ref) { old_project.to_reference }
 
@@ -76,6 +76,26 @@ describe Gitlab::Gfm::ReferenceRewriter do
             it { is_expected.to eq %Q{#{project_ref}#1 and #{project_ref}~123} }
           end
         end
+
+        context 'description with group labels' do
+          let(:old_group) { create(:group) }
+          let!(:group_label) { create(:group_label, id: 321, name: 'group label', group: old_group) }
+          let(:project_ref) { old_project.to_reference }
+
+          before do
+            old_project.update(namespace: old_group)
+          end
+
+          context 'label referenced by id' do
+            let(:text) { '#1 and ~321' }
+            it { is_expected.to eq %Q{#{project_ref}#1 and #{project_ref}~321} }
+          end
+
+          context 'label referenced by text' do
+            let(:text) { '#1 and ~"group label"' }
+            it { is_expected.to eq %Q{#{project_ref}#1 and #{project_ref}~321} }
+          end
+        end
       end
 
       context 'reference contains milestone' do
diff --git a/spec/lib/gitlab/github_import/importer_spec.rb b/spec/lib/gitlab/github_import/importer_spec.rb
index 8854c8431b5..1af553f8f03 100644
--- a/spec/lib/gitlab/github_import/importer_spec.rb
+++ b/spec/lib/gitlab/github_import/importer_spec.rb
@@ -157,7 +157,7 @@ describe Gitlab::GithubImport::Importer, lib: true do
             { type: :pull_request, url: "https://api.github.com/repos/octocat/Hello-World/pulls/1347", errors: "Validation failed: Validate branches Cannot Create: This merge request already exists: [\"New feature\"]" },
             { type: :wiki, errors: "Gitlab::Shell::Error" },
             { type: :release, url: 'https://api.github.com/repos/octocat/Hello-World/releases/2', errors: "Validation failed: Description can't be blank" }
-        ]
+          ]
         }
 
         described_class.new(project).execute
diff --git a/spec/lib/gitlab/google_code_import/importer_spec.rb b/spec/lib/gitlab/google_code_import/importer_spec.rb
index 54f85f8cffc..097861fd34d 100644
--- a/spec/lib/gitlab/google_code_import/importer_spec.rb
+++ b/spec/lib/gitlab/google_code_import/importer_spec.rb
@@ -15,6 +15,7 @@ describe Gitlab::GoogleCodeImport::Importer, lib: true do
   subject { described_class.new(project) }
 
   before do
+    project.team << [project.creator, :master]
     project.create_import_data(data: import_data)
   end
 
@@ -31,9 +32,9 @@ describe Gitlab::GoogleCodeImport::Importer, lib: true do
       subject.execute
 
       %w(
-        Type-Defect Type-Enhancement Type-Task Type-Review Type-Other Milestone-0.12 Priority-Critical 
-        Priority-High Priority-Medium Priority-Low OpSys-All OpSys-Windows OpSys-Linux OpSys-OSX Security 
-        Performance Usability Maintainability Component-Panel Component-Taskbar Component-Battery 
+        Type-Defect Type-Enhancement Type-Task Type-Review Type-Other Milestone-0.12 Priority-Critical
+        Priority-High Priority-Medium Priority-Low OpSys-All OpSys-Windows OpSys-Linux OpSys-OSX Security
+        Performance Usability Maintainability Component-Panel Component-Taskbar Component-Battery
         Component-Systray Component-Clock Component-Launcher Component-Tint2conf Component-Docs Component-New
       ).each do |label|
         label.sub!("-", ": ")
diff --git a/spec/lib/gitlab/import_export/all_models.yml b/spec/lib/gitlab/import_export/all_models.yml
index 8fcbf12eab8..02b11bd999a 100644
--- a/spec/lib/gitlab/import_export/all_models.yml
+++ b/spec/lib/gitlab/import_export/all_models.yml
@@ -38,6 +38,7 @@ label:
 - label_links
 - issues
 - merge_requests
+- priorities
 milestone:
 - project
 - issues
@@ -186,3 +187,5 @@ project:
 award_emoji:
 - awardable
 - user
+priorities:
+- label
\ No newline at end of file
diff --git a/spec/lib/gitlab/import_export/project.json b/spec/lib/gitlab/import_export/project.json
index 98323fe6be4..ed9df468ced 100644
--- a/spec/lib/gitlab/import_export/project.json
+++ b/spec/lib/gitlab/import_export/project.json
@@ -2,6 +2,21 @@
   "description": "Nisi et repellendus ut enim quo accusamus vel magnam.",
   "visibility_level": 10,
   "archived": false,
+  "labels": [
+    {
+      "id": 2,
+      "title": "test2",
+      "color": "#428bca",
+      "project_id": 8,
+      "created_at": "2016-07-22T08:55:44.161Z",
+      "updated_at": "2016-07-22T08:55:44.161Z",
+      "template": false,
+      "description": "",
+      "type": "ProjectLabel",
+      "priorities": [
+      ]
+    }
+  ],
   "issues": [
     {
       "id": 40,
@@ -64,7 +79,37 @@
             "updated_at": "2016-07-22T08:55:44.161Z",
             "template": false,
             "description": "",
-            "priority": null
+            "type": "ProjectLabel"
+          }
+        },
+        {
+          "id": 3,
+          "label_id": 3,
+          "target_id": 40,
+          "target_type": "Issue",
+          "created_at": "2016-07-22T08:57:02.841Z",
+          "updated_at": "2016-07-22T08:57:02.841Z",
+          "label": {
+            "id": 3,
+            "title": "test3",
+            "color": "#428bca",
+            "group_id": 8,
+            "created_at": "2016-07-22T08:55:44.161Z",
+            "updated_at": "2016-07-22T08:55:44.161Z",
+            "template": false,
+            "description": "",
+            "project_id": null,
+            "type": "GroupLabel",
+            "priorities": [
+              {
+                "id": 1,
+                "project_id": 5,
+                "label_id": 1,
+                "priority": 1,
+                "created_at": "2016-10-18T09:35:43.338Z",
+                "updated_at": "2016-10-18T09:35:43.338Z"
+              }
+            ]
           }
         }
       ],
@@ -536,7 +581,7 @@
             "updated_at": "2016-07-22T08:55:44.161Z",
             "template": false,
             "description": "",
-            "priority": null
+            "type": "ProjectLabel"
           }
         }
       ],
@@ -2227,9 +2272,6 @@
       ]
     }
   ],
-  "labels": [
-
-  ],
   "milestones": [
     {
       "id": 1,
diff --git a/spec/lib/gitlab/import_export/project_tree_restorer_spec.rb b/spec/lib/gitlab/import_export/project_tree_restorer_spec.rb
index 7582a732cdf..069ea960321 100644
--- a/spec/lib/gitlab/import_export/project_tree_restorer_spec.rb
+++ b/spec/lib/gitlab/import_export/project_tree_restorer_spec.rb
@@ -32,7 +32,7 @@ describe Gitlab::ImportExport::ProjectTreeRestorer, services: true do
       it 'has the same label associated to two issues' do
         restored_project_json
 
-        expect(Label.first.issues.count).to eq(2)
+        expect(ProjectLabel.find_by_title('test2').issues.count).to eq(2)
       end
 
       it 'has milestones associated to two separate issues' do
@@ -107,6 +107,41 @@ describe Gitlab::ImportExport::ProjectTreeRestorer, services: true do
         expect(Label.first.label_links.first.target).not_to be_nil
       end
 
+      it 'has project labels' do
+        restored_project_json
+
+        expect(ProjectLabel.count).to eq(2)
+      end
+
+      it 'has no group labels' do
+        restored_project_json
+
+        expect(GroupLabel.count).to eq(0)
+      end
+
+      context 'with group' do
+        let!(:project) do 
+          create(:empty_project,
+                                name: 'project',
+                                path: 'project',
+                                builds_access_level: ProjectFeature::DISABLED,
+                                issues_access_level: ProjectFeature::DISABLED,
+                                group: create(:group)) 
+        end
+
+        it 'has group labels' do
+          restored_project_json
+
+          expect(GroupLabel.count).to eq(1)
+        end
+
+        it 'has label priorities' do
+          restored_project_json
+
+          expect(GroupLabel.first.priorities).not_to be_empty
+        end
+      end
+
       it 'has a project feature' do
         restored_project_json
 
diff --git a/spec/lib/gitlab/import_export/project_tree_saver_spec.rb b/spec/lib/gitlab/import_export/project_tree_saver_spec.rb
index cf8f2200c57..c8bba553558 100644
--- a/spec/lib/gitlab/import_export/project_tree_saver_spec.rb
+++ b/spec/lib/gitlab/import_export/project_tree_saver_spec.rb
@@ -111,6 +111,18 @@ describe Gitlab::ImportExport::ProjectTreeSaver, services: true do
         expect(saved_project_json['issues'].first['label_links'].first['label']).not_to be_empty
       end
 
+      it 'has project and group labels' do
+        label_types = saved_project_json['issues'].first['label_links'].map { |link| link['label']['type']}
+
+        expect(label_types).to match_array(['ProjectLabel', 'GroupLabel'])
+      end
+
+      it 'has priorities associated to labels' do
+        priorities = saved_project_json['issues'].first['label_links'].map { |link| link['label']['priorities']}
+
+        expect(priorities.flatten).not_to be_empty
+      end
+
       it 'saves the correct service type' do
         expect(saved_project_json['services'].first['type']).to eq('CustomIssueTrackerService')
       end
@@ -135,15 +147,20 @@ describe Gitlab::ImportExport::ProjectTreeSaver, services: true do
     issue = create(:issue, assignee: user)
     snippet = create(:project_snippet)
     release = create(:release)
+    group = create(:group)
 
     project = create(:project,
                      :public,
                      issues: [issue],
                      snippets: [snippet],
-                     releases: [release]
+                     releases: [release],
+                     group: group
                     )
-    label = create(:label, project: project)
-    create(:label_link, label: label, target: issue)
+    project_label = create(:label, project: project)
+    group_label = create(:group_label, group: group)
+    create(:label_link, label: project_label, target: issue)
+    create(:label_link, label: group_label, target: issue)
+    create(:label_priority, label: group_label, priority: 1)
     milestone = create(:milestone, project: project)
     merge_request = create(:merge_request, source_project: project, milestone: milestone)
     commit_status = create(:commit_status, project: project)
diff --git a/spec/lib/gitlab/import_export/safe_model_attributes.yml b/spec/lib/gitlab/import_export/safe_model_attributes.yml
index 8c8be66df9f..feee0f025d8 100644
--- a/spec/lib/gitlab/import_export/safe_model_attributes.yml
+++ b/spec/lib/gitlab/import_export/safe_model_attributes.yml
@@ -60,11 +60,13 @@ LabelLink:
 - target_type
 - created_at
 - updated_at
-Label:
+ProjectLabel:
 - id
 - title
 - color
+- group_id
 - project_id
+- type
 - created_at
 - updated_at
 - template
@@ -329,3 +331,10 @@ AwardEmoji:
 - awardable_type
 - created_at
 - updated_at
+LabelPriority:
+- id
+- project_id
+- label_id
+- priority
+- created_at
+- updated_at
\ No newline at end of file
diff --git a/spec/models/group_label_spec.rb b/spec/models/group_label_spec.rb
new file mode 100644
index 00000000000..85eb889225b
--- /dev/null
+++ b/spec/models/group_label_spec.rb
@@ -0,0 +1,47 @@
+require 'spec_helper'
+
+describe GroupLabel, models: true do
+  describe 'relationships' do
+    it { is_expected.to belong_to(:group) }
+  end
+
+  describe 'validations' do
+    it { is_expected.to validate_presence_of(:group) }
+  end
+
+  describe '#subject' do
+    it 'aliases group to subject' do
+      subject = described_class.new(group: build(:group))
+
+      expect(subject.subject).to be(subject.group)
+    end
+  end
+
+  describe '#to_reference' do
+    let(:label) { create(:group_label) }
+
+    context 'using id' do
+      it 'returns a String reference to the object' do
+        expect(label.to_reference).to eq "~#{label.id}"
+      end
+    end
+
+    context 'using name' do
+      it 'returns a String reference to the object' do
+        expect(label.to_reference(format: :name)).to eq %(~"#{label.name}")
+      end
+
+      it 'uses id when name contains double quote' do
+        label = create(:label, name: %q{"irony"})
+        expect(label.to_reference(format: :name)).to eq "~#{label.id}"
+      end
+    end
+
+    context 'using invalid format' do
+      it 'raises error' do
+        expect { label.to_reference(format: :invalid) }
+          .to raise_error StandardError, /Unknown format/
+      end
+    end
+  end
+end
diff --git a/spec/models/group_spec.rb b/spec/models/group_spec.rb
index 0b3ef9b98fd..ac862055ebc 100644
--- a/spec/models/group_spec.rb
+++ b/spec/models/group_spec.rb
@@ -12,6 +12,7 @@ describe Group, models: true do
     it { is_expected.to have_many(:project_group_links).dependent(:destroy) }
     it { is_expected.to have_many(:shared_projects).through(:project_group_links) }
     it { is_expected.to have_many(:notification_settings).dependent(:destroy) }
+    it { is_expected.to have_many(:labels).class_name('GroupLabel') }
 
     describe '#members & #requesters' do
       let(:requester) { create(:user) }
diff --git a/spec/models/label_priority_spec.rb b/spec/models/label_priority_spec.rb
new file mode 100644
index 00000000000..d18c2f7949a
--- /dev/null
+++ b/spec/models/label_priority_spec.rb
@@ -0,0 +1,20 @@
+require 'spec_helper'
+
+describe LabelPriority, models: true do
+  describe 'relationships' do
+    it { is_expected.to belong_to(:project) }
+    it { is_expected.to belong_to(:label) }
+  end
+
+  describe 'validations' do
+    it { is_expected.to validate_presence_of(:project) }
+    it { is_expected.to validate_presence_of(:label) }
+    it { is_expected.to validate_numericality_of(:priority).only_integer.is_greater_than_or_equal_to(0) }
+
+    it 'validates uniqueness of label_id scoped to project_id' do
+      create(:label_priority)
+
+      expect(subject).to validate_uniqueness_of(:label_id).scoped_to(:project_id)
+    end
+  end
+end
diff --git a/spec/models/label_spec.rb b/spec/models/label_spec.rb
index 5a5d1a5d60c..0c163659a71 100644
--- a/spec/models/label_spec.rb
+++ b/spec/models/label_spec.rb
@@ -1,46 +1,42 @@
 require 'spec_helper'
 
 describe Label, models: true do
-  let(:label) { create(:label) }
+  describe 'modules' do
+    it { is_expected.to include_module(Referable) }
+    it { is_expected.to include_module(Subscribable) }
+  end
 
   describe 'associations' do
-    it { is_expected.to belong_to(:project) }
-
-    it { is_expected.to have_many(:label_links).dependent(:destroy) }
     it { is_expected.to have_many(:issues).through(:label_links).source(:target) }
+    it { is_expected.to have_many(:label_links).dependent(:destroy) }
     it { is_expected.to have_many(:lists).dependent(:destroy) }
-  end
-
-  describe 'modules' do
-    subject { described_class }
-
-    it { is_expected.to include_module(Referable) }
+    it { is_expected.to have_many(:priorities).class_name('LabelPriority') }
   end
 
   describe 'validation' do
-    it { is_expected.to validate_presence_of(:project) }
+    it { is_expected.to validate_uniqueness_of(:title).scoped_to([:group_id, :project_id]) }
 
     it 'validates color code' do
-      expect(label).not_to allow_value('G-ITLAB').for(:color)
-      expect(label).not_to allow_value('AABBCC').for(:color)
-      expect(label).not_to allow_value('#AABBCCEE').for(:color)
-      expect(label).not_to allow_value('GGHHII').for(:color)
-      expect(label).not_to allow_value('#').for(:color)
-      expect(label).not_to allow_value('').for(:color)
-
-      expect(label).to allow_value('#AABBCC').for(:color)
-      expect(label).to allow_value('#abcdef').for(:color)
+      is_expected.not_to allow_value('G-ITLAB').for(:color)
+      is_expected.not_to allow_value('AABBCC').for(:color)
+      is_expected.not_to allow_value('#AABBCCEE').for(:color)
+      is_expected.not_to allow_value('GGHHII').for(:color)
+      is_expected.not_to allow_value('#').for(:color)
+      is_expected.not_to allow_value('').for(:color)
+
+      is_expected.to allow_value('#AABBCC').for(:color)
+      is_expected.to allow_value('#abcdef').for(:color)
     end
 
     it 'validates title' do
-      expect(label).not_to allow_value('G,ITLAB').for(:title)
-      expect(label).not_to allow_value('').for(:title)
-
-      expect(label).to allow_value('GITLAB').for(:title)
-      expect(label).to allow_value('gitlab').for(:title)
-      expect(label).to allow_value('G?ITLAB').for(:title)
-      expect(label).to allow_value('G&ITLAB').for(:title)
-      expect(label).to allow_value("customer's request").for(:title)
+      is_expected.not_to allow_value('G,ITLAB').for(:title)
+      is_expected.not_to allow_value('').for(:title)
+
+      is_expected.to allow_value('GITLAB').for(:title)
+      is_expected.to allow_value('gitlab').for(:title)
+      is_expected.to allow_value('G?ITLAB').for(:title)
+      is_expected.to allow_value('G&ITLAB').for(:title)
+      is_expected.to allow_value("customer's request").for(:title)
     end
   end
 
@@ -51,45 +47,59 @@ describe Label, models: true do
     end
   end
 
-  describe '#to_reference' do
-    context 'using id' do
-      it 'returns a String reference to the object' do
-        expect(label.to_reference).to eq "~#{label.id}"
-      end
-    end
+  describe 'priorization' do
+    subject(:label) { create(:label) }
 
-    context 'using name' do
-      it 'returns a String reference to the object' do
-        expect(label.to_reference(format: :name)).to eq %(~"#{label.name}")
+    let(:project) { label.project }
+
+    describe '#prioritize!' do
+      context 'when label is not prioritized' do
+        it 'creates a label priority' do
+          expect { label.prioritize!(project, 1) }.to change(label.priorities, :count).by(1)
+        end
+
+        it 'sets label priority' do
+          label.prioritize!(project, 1)
+
+          expect(label.priorities.first.priority).to eq 1
+        end
       end
 
-      it 'uses id when name contains double quote' do
-        label = create(:label, name: %q{"irony"})
-        expect(label.to_reference(format: :name)).to eq "~#{label.id}"
+      context 'when label is prioritized' do
+        let!(:priority) { create(:label_priority, project: project, label: label, priority: 0) }
+
+        it 'does not create a label priority' do
+          expect { label.prioritize!(project, 1) }.not_to change(label.priorities, :count)
+        end
+
+        it 'updates label priority' do
+          label.prioritize!(project, 1)
+
+          expect(priority.reload.priority).to eq 1
+        end
       end
     end
 
-    context 'using invalid format' do
-      it 'raises error' do
-        expect { label.to_reference(format: :invalid) }
-          .to raise_error StandardError, /Unknown format/
+    describe '#unprioritize!' do
+      it 'removes label priority' do
+        create(:label_priority, project: project, label: label, priority: 0)
+
+        expect { label.unprioritize!(project) }.to change(label.priorities, :count).by(-1)
       end
     end
 
-    context 'cross project reference' do
-      let(:project) { create(:project) }
-
-      context 'using name' do
-        it 'returns cross reference with label name' do
-          expect(label.to_reference(project, format: :name))
-            .to eq %Q(#{label.project.to_reference}~"#{label.name}")
+    describe '#priority' do
+      context 'when label is not prioritized' do
+        it 'returns nil' do
+          expect(label.priority(project)).to be_nil
         end
       end
 
-      context 'using id' do
-        it 'returns cross reference with label id' do
-          expect(label.to_reference(project, format: :id))
-            .to eq %Q(#{label.project.to_reference}~#{label.id})
+      context 'when label is prioritized' do
+        it 'returns label priority' do
+          create(:label_priority, project: project, label: label, priority: 1)
+
+          expect(label.priority(project)).to eq 1
         end
       end
     end
diff --git a/spec/models/project_label_spec.rb b/spec/models/project_label_spec.rb
new file mode 100644
index 00000000000..18c9d449ee5
--- /dev/null
+++ b/spec/models/project_label_spec.rb
@@ -0,0 +1,120 @@
+require 'spec_helper'
+
+describe ProjectLabel, models: true do
+  describe 'relationships' do
+    it { is_expected.to belong_to(:project) }
+  end
+
+  describe 'validations' do
+    it { is_expected.to validate_presence_of(:project) }
+
+    context 'validates if title must not exist at group level' do
+      let(:group) { create(:group, name: 'gitlab-org') }
+      let(:project) { create(:empty_project, group: group) }
+
+      before do
+        create(:group_label, group: group, title: 'Bug')
+      end
+
+      it 'returns error if title already exists at group level' do
+        label = described_class.new(project: project, title: 'Bug')
+
+        label.valid?
+
+        expect(label.errors[:title]).to include 'already exists at group level for gitlab-org. Please choose another one.'
+      end
+
+      it 'does not returns error if title does not exist at group level' do
+        label = described_class.new(project: project, title: 'Security')
+
+        label.valid?
+
+        expect(label.errors[:title]).to be_empty
+      end
+
+      it 'does not returns error if project does not belong to group' do
+        another_project = create(:empty_project)
+        label = described_class.new(project: another_project, title: 'Bug')
+
+        label.valid?
+
+        expect(label.errors[:title]).to be_empty
+      end
+
+      it 'does not returns error when title does not change' do
+        project_label = create(:label, project: project, name: 'Security')
+        create(:group_label, group: group, name: 'Security')
+        project_label.description = 'Security related stuff.'
+
+        project_label.valid?
+
+        expect(project_label.errors[:title]).to be_empty
+      end
+    end
+
+    context 'when attempting to add more than one priority to the project label' do
+      it 'returns error' do
+        subject.priorities.build
+        subject.priorities.build
+
+        subject.valid?
+
+        expect(subject.errors[:priorities]).to include 'Number of permitted priorities exceeded'
+      end
+    end
+  end
+
+  describe '#subject' do
+    it 'aliases project to subject' do
+      subject = described_class.new(project: build(:empty_project))
+
+      expect(subject.subject).to be(subject.project)
+    end
+  end
+
+  describe '#to_reference' do
+    let(:label) { create(:label) }
+
+    context 'using id' do
+      it 'returns a String reference to the object' do
+        expect(label.to_reference).to eq "~#{label.id}"
+      end
+    end
+
+    context 'using name' do
+      it 'returns a String reference to the object' do
+        expect(label.to_reference(format: :name)).to eq %(~"#{label.name}")
+      end
+
+      it 'uses id when name contains double quote' do
+        label = create(:label, name: %q{"irony"})
+        expect(label.to_reference(format: :name)).to eq "~#{label.id}"
+      end
+    end
+
+    context 'using invalid format' do
+      it 'raises error' do
+        expect { label.to_reference(format: :invalid) }
+          .to raise_error StandardError, /Unknown format/
+      end
+    end
+
+    context 'cross project reference' do
+      let(:project) { create(:project) }
+
+      context 'using name' do
+        it 'returns cross reference with label name' do
+          expect(label.to_reference(project, format: :name))
+            .to eq %Q(#{label.project.to_reference}~"#{label.name}")
+        end
+      end
+
+      context 'using id' do
+        it 'returns cross reference with label id' do
+          expect(label.to_reference(project, format: :id))
+            .to eq %Q(#{label.project.to_reference}~#{label.id})
+        end
+      end
+    end
+  end
+end
diff --git a/spec/models/project_spec.rb b/spec/models/project_spec.rb
index 67dbcc362f6..e6d98e25d0b 100644
--- a/spec/models/project_spec.rb
+++ b/spec/models/project_spec.rb
@@ -56,7 +56,7 @@ describe Project, models: true do
     it { is_expected.to have_many(:runners) }
     it { is_expected.to have_many(:variables) }
     it { is_expected.to have_many(:triggers) }
-    it { is_expected.to have_many(:labels).dependent(:destroy) }
+    it { is_expected.to have_many(:labels).class_name('ProjectLabel').dependent(:destroy) }
     it { is_expected.to have_many(:users_star_projects).dependent(:destroy) }
     it { is_expected.to have_many(:environments).dependent(:destroy) }
     it { is_expected.to have_many(:deployments).dependent(:destroy) }
diff --git a/spec/requests/api/boards_spec.rb b/spec/requests/api/boards_spec.rb
index f4b04445c6c..4f5c09a3029 100644
--- a/spec/requests/api/boards_spec.rb
+++ b/spec/requests/api/boards_spec.rb
@@ -106,9 +106,20 @@ describe API::API, api: true  do
   describe "POST /projects/:id/board/lists" do
     let(:base_url) { "/projects/#{project.id}/boards/#{board.id}/lists" }
 
-    it 'creates a new issue board list' do
-      post api(base_url, user),
-        label_id: ux_label.id
+    it 'creates a new issue board list for group labels' do
+      group = create(:group)
+      group_label = create(:group_label, group: group)
+      project.update(group: group)
+
+      post api(base_url, user), label_id: group_label.id
+
+      expect(response).to have_http_status(201)
+      expect(json_response['label']['name']).to eq(group_label.title)
+      expect(json_response['position']).to eq(3)
+    end
+
+    it 'creates a new issue board list for project labels' do
+      post api(base_url, user), label_id: ux_label.id
 
       expect(response).to have_http_status(201)
       expect(json_response['label']['name']).to eq(ux_label.title)
@@ -116,15 +127,13 @@ describe API::API, api: true  do
     end
 
     it 'returns 400 when creating a new list if label_id is invalid' do
-      post api(base_url, user),
-        label_id: 23423
+      post api(base_url, user), label_id: 23423
 
       expect(response).to have_http_status(400)
     end
 
-    it "returns 403 for project members with guest role" do
-      put api("#{base_url}/#{test_list.id}", guest),
-        position: 1
+    it 'returns 403 for project members with guest role' do
+      put api("#{base_url}/#{test_list.id}", guest), position: 1
 
       expect(response).to have_http_status(403)
     end
diff --git a/spec/requests/api/labels_spec.rb b/spec/requests/api/labels_spec.rb
index 83789223019..1da9988978b 100644
--- a/spec/requests/api/labels_spec.rb
+++ b/spec/requests/api/labels_spec.rb
@@ -12,12 +12,18 @@ describe API::API, api: true  do
   end
 
   describe 'GET /projects/:id/labels' do
-    it 'returns project labels' do
+    it 'returns all available labels to the project' do
+      group = create(:group)
+      group_label = create(:group_label, group: group)
+      project.update(group: group)
+
       get api("/projects/#{project.id}/labels", user)
+
       expect(response).to have_http_status(200)
       expect(json_response).to be_an Array
-      expect(json_response.size).to eq(1)
-      expect(json_response.first['name']).to eq(label1.name)
+      expect(json_response.size).to eq(2)
+      expect(json_response.first['name']).to eq(group_label.name)
+      expect(json_response.second['name']).to eq(label1.name)
     end
   end
 
diff --git a/spec/services/boards/lists/create_service_spec.rb b/spec/services/boards/lists/create_service_spec.rb
index e7806add916..a7e9efcf93f 100644
--- a/spec/services/boards/lists/create_service_spec.rb
+++ b/spec/services/boards/lists/create_service_spec.rb
@@ -9,6 +9,10 @@ describe Boards::Lists::CreateService, services: true do
 
     subject(:service) { described_class.new(project, user, label_id: label.id) }
 
+    before do
+      project.team << [user, :developer]
+    end
+
     context 'when board lists is empty' do
       it 'creates a new list at beginning of the list' do
         list = service.execute(board)
diff --git a/spec/services/boards/lists/generate_service_spec.rb b/spec/services/boards/lists/generate_service_spec.rb
index 8b2f5e81338..ed0337662af 100644
--- a/spec/services/boards/lists/generate_service_spec.rb
+++ b/spec/services/boards/lists/generate_service_spec.rb
@@ -8,6 +8,10 @@ describe Boards::Lists::GenerateService, services: true do
 
     subject(:service) { described_class.new(project, user) }
 
+    before do
+      project.team << [user, :developer]
+    end
+
     context 'when board lists is empty' do
       it 'creates the default lists' do
         expect { service.execute(board) }.to change(board.lists, :count).by(2)
diff --git a/spec/services/issues/create_service_spec.rb b/spec/services/issues/create_service_spec.rb
index 1050502fa19..5c0331ebe66 100644
--- a/spec/services/issues/create_service_spec.rb
+++ b/spec/services/issues/create_service_spec.rb
@@ -67,6 +67,27 @@ describe Issues::CreateService, services: true do
         expect(Todo.where(attributes).count).to eq 1
       end
 
+      context 'when label belongs to project group' do
+        let(:group) { create(:group) }
+        let(:group_labels) { create_pair(:group_label, group: group) }
+
+        let(:opts) do
+          {
+            title: 'Title',
+            description: 'Description',
+            label_ids: group_labels.map(&:id)
+          }
+        end
+
+        before do
+          project.update(group: group)
+        end
+
+        it 'assigns group labels' do
+          expect(issue.labels).to match_array group_labels
+        end
+      end
+
       context 'when label belongs to different project' do
         let(:label) { create(:label) }
 
diff --git a/spec/services/labels/find_or_create_service_spec.rb b/spec/services/labels/find_or_create_service_spec.rb
new file mode 100644
index 00000000000..cbfc63de811
--- /dev/null
+++ b/spec/services/labels/find_or_create_service_spec.rb
@@ -0,0 +1,51 @@
+require 'spec_helper'
+
+describe Labels::FindOrCreateService, services: true do
+  describe '#execute' do
+    let(:user)    { create(:user) }
+    let(:group)   { create(:group) }
+    let(:project) { create(:project, namespace: group) }
+
+    let(:params) do
+      {
+        title: 'Security',
+        description: 'Security related stuff.',
+        color: '#FF0000'
+      }
+    end
+
+    subject(:service) { described_class.new(user, project, params) }
+
+    before do
+      project.team << [user, :developer]
+    end
+
+    context 'when label does not exist at group level' do
+      it 'creates a new label at project level' do
+        expect { service.execute }.to change(project.labels, :count).by(1)
+      end
+    end
+
+    context 'when label exists at group level' do
+      it 'returns the group label' do
+        group_label = create(:group_label, group: group, title: 'Security')
+
+        expect(service.execute).to eq group_label
+      end
+    end
+
+    context 'when label does not exist at group level' do
+      it 'creates a new label at project leve' do
+        expect { service.execute }.to change(project.labels, :count).by(1)
+      end
+    end
+
+    context 'when label exists at project level' do
+      it 'returns the project label' do
+        project_label = create(:label, project: project, title: 'Security')
+
+        expect(service.execute).to eq project_label
+      end
+    end
+  end
+end
diff --git a/spec/services/labels/transfer_service_spec.rb b/spec/services/labels/transfer_service_spec.rb
new file mode 100644
index 00000000000..ddf3527dc0f
--- /dev/null
+++ b/spec/services/labels/transfer_service_spec.rb
@@ -0,0 +1,56 @@
+require 'spec_helper'
+
+describe Labels::TransferService, services: true do
+  describe '#execute' do
+    let(:user)    { create(:user) }
+    let(:group_1) { create(:group) }
+    let(:group_2) { create(:group) }
+    let(:group_3) { create(:group) }
+    let(:project_1) { create(:project, namespace: group_2) }
+    let(:project_2) { create(:project, namespace: group_3) }
+
+    let(:group_label_1) { create(:group_label, group: group_1, name: 'Group Label 1') }
+    let(:group_label_2) { create(:group_label, group: group_1, name: 'Group Label 2') }
+    let(:group_label_3) { create(:group_label, group: group_1, name: 'Group Label 3') }
+    let(:group_label_4) { create(:group_label, group: group_2, name: 'Group Label 4') }
+    let(:group_label_5) { create(:group_label, group: group_3, name: 'Group Label 5') }
+    let(:project_label_1) { create(:label, project: project_1, name: 'Project Label 1') }
+
+    subject(:service) { described_class.new(user, group_1, project_1) }
+
+    before do
+      create(:labeled_issue, project: project_1, labels: [group_label_1])
+      create(:labeled_issue, project: project_1, labels: [group_label_4])
+      create(:labeled_issue, project: project_1, labels: [project_label_1])
+      create(:labeled_issue, project: project_2, labels: [group_label_5])
+      create(:labeled_merge_request, source_project: project_1, labels: [group_label_1, group_label_2])
+      create(:labeled_merge_request, source_project: project_2, labels: [group_label_5])
+    end
+
+    it 'recreates the missing group labels at project level' do
+      expect { service.execute }.to change(project_1.labels, :count).by(2)
+    end
+
+    it 'recreates label priorities related to the missing group labels' do
+      create(:label_priority, project: project_1, label: group_label_1, priority: 1)
+
+      service.execute
+
+      new_project_label = project_1.labels.find_by(title: group_label_1.title)
+      expect(new_project_label.id).not_to eq group_label_1.id
+      expect(new_project_label.priorities).not_to be_empty
+    end
+
+    it 'does not recreate missing group labels that are not applied to issues or merge requests' do
+      service.execute
+
+      expect(project_1.labels.where(title: group_label_3.title)).to be_empty
+    end
+
+    it 'does not recreate missing group labels that already exist in the project group' do
+      service.execute
+
+      expect(project_1.labels.where(title: group_label_4.title)).to be_empty
+    end
+  end
+end
diff --git a/spec/services/projects/transfer_service_spec.rb b/spec/services/projects/transfer_service_spec.rb
index 57c71544dff..1540b90163a 100644
--- a/spec/services/projects/transfer_service_spec.rb
+++ b/spec/services/projects/transfer_service_spec.rb
@@ -71,4 +71,14 @@ describe Projects::TransferService, services: true do
       it { expect(private_project.visibility_level).to eq(Gitlab::VisibilityLevel::PRIVATE) }
     end
   end
+
+  context 'missing group labels applied to issues or merge requests' do
+    it 'delegates tranfer to Labels::TransferService' do
+      group.add_owner(user)
+
+      expect_any_instance_of(Labels::TransferService).to receive(:execute).once.and_call_original
+
+      transfer_project(project, user, group)
+    end
+  end
 end