diff --git a/bgpd/bgp_mplsvpn.c b/bgpd/bgp_mplsvpn.c
index ca7f73dde993..e18293c0470c 100644
--- a/bgpd/bgp_mplsvpn.c
+++ b/bgpd/bgp_mplsvpn.c
@@ -4074,6 +4074,35 @@ void bgp_vpn_leak_export(struct bgp *from_bgp)
 	}
 }
 
+/* It releases the label from labelpool which
+ * was previously assigned and unsets the flag based on reset arg
+ * This also used in vty to release the label and to change the allocation mode as well
+ */
+void bgp_vpn_release_label(struct bgp *bgp, afi_t afi, bool reset)
+{
+	if (!CHECK_FLAG(bgp->vpn_policy[afi].flags, BGP_VPN_POLICY_TOVPN_LABEL_AUTO))
+		return;
+	/*
+	 * label has previously been automatically
+	 * assigned by labelpool: release it
+	 *
+	 * NB if tovpn_label == MPLS_LABEL_NONE it
+	 * means the automatic assignment is in flight
+	 * and therefore the labelpool callback must
+	 * detect that the auto label is not needed.
+	 */
+	if (bgp->vpn_policy[afi].tovpn_label == MPLS_LABEL_NONE)
+		return;
+	if (CHECK_FLAG(bgp->vpn_policy[afi].flags, BGP_VPN_POLICY_TOVPN_LABEL_PER_NEXTHOP))
+		return;
+
+	bgp_lp_release(LP_TYPE_VRF, &bgp->vpn_policy[afi], bgp->vpn_policy[afi].tovpn_label);
+	bgp->vpn_policy[afi].tovpn_label = MPLS_LABEL_NONE;
+
+	if (reset)
+		UNSET_FLAG(bgp->vpn_policy[afi].flags, BGP_VPN_POLICY_TOVPN_LABEL_AUTO);
+}
+
 /* The nexthops values are compared to
  * find in the tree the appropriate cache entry
  */
diff --git a/bgpd/bgp_mplsvpn.h b/bgpd/bgp_mplsvpn.h
index 39fed667818a..18639fc69b23 100644
--- a/bgpd/bgp_mplsvpn.h
+++ b/bgpd/bgp_mplsvpn.h
@@ -352,6 +352,7 @@ extern void vpn_handle_router_id_update(struct bgp *bgp, bool withdraw,
 					bool is_config);
 extern void bgp_vpn_leak_unimport(struct bgp *from_bgp);
 extern void bgp_vpn_leak_export(struct bgp *from_bgp);
+extern void bgp_vpn_release_label(struct bgp *bgp, afi_t afi, bool reset);
 
 extern bool bgp_mplsvpn_path_uses_valid_mpls_label(struct bgp_path_info *pi);
 extern int
diff --git a/bgpd/bgp_vty.c b/bgpd/bgp_vty.c
index 6ff94129dcf5..296ebaf0ac72 100644
--- a/bgpd/bgp_vty.c
+++ b/bgpd/bgp_vty.c
@@ -9941,26 +9941,9 @@ DEFPY (af_label_vpn_export,
 		UNSET_FLAG(bgp->vpn_policy[afi].flags,
 			   BGP_VPN_POLICY_TOVPN_LABEL_MANUAL_REG);
 
-	} else if (CHECK_FLAG(bgp->vpn_policy[afi].flags,
-			      BGP_VPN_POLICY_TOVPN_LABEL_AUTO)) {
+	} else if (CHECK_FLAG(bgp->vpn_policy[afi].flags, BGP_VPN_POLICY_TOVPN_LABEL_AUTO))
 		/* release any previous auto label */
-		if (bgp->vpn_policy[afi].tovpn_label != MPLS_LABEL_NONE) {
-
-			/*
-			 * label has previously been automatically
-			 * assigned by labelpool: release it
-			 *
-			 * NB if tovpn_label == MPLS_LABEL_NONE it
-			 * means the automatic assignment is in flight
-			 * and therefore the labelpool callback must
-			 * detect that the auto label is not needed.
-			 */
-
-			bgp_lp_release(LP_TYPE_VRF,
-				       &bgp->vpn_policy[afi],
-				       bgp->vpn_policy[afi].tovpn_label);
-		}
-	}
+		bgp_vpn_release_label(bgp, afi, false);
 
 	if (yes) {
 		if (label_auto) {
diff --git a/bgpd/bgpd.c b/bgpd/bgpd.c
index dccac3eceb19..0791919287b1 100644
--- a/bgpd/bgpd.c
+++ b/bgpd/bgpd.c
@@ -4006,6 +4006,9 @@ int bgp_delete(struct bgp *bgp)
 
 	bgp_vpn_leak_unimport(bgp);
 
+	bgp_vpn_release_label(bgp, AFI_IP, true);
+	bgp_vpn_release_label(bgp, AFI_IP6, true);
+
 	hook_call(bgp_inst_delete, bgp);
 
 	FOREACH_AFI_SAFI (afi, safi)