diff --git a/test_mcp_labels.py b/test_mcp_labels.py
new file mode 100644
index 0000000..636f621
--- /dev/null
+++ b/test_mcp_labels.py
@@ -0,0 +1,136 @@
+#!/usr/bin/env python3
+"""
+Test MCP Server Label Fetching
+Verifies that the Gitea MCP server can fetch all 43 labels (27 org + 16 repo)
+"""
+import sys
+import os
+import asyncio
+
+# Add mcp-servers/gitea to path
+sys.path.insert(0, os.path.join(os.path.dirname(__file__), 'mcp-servers', 'gitea'))
+
+from mcp_server.gitea_client import GiteaClient
+from mcp_server.tools.labels import LabelTools
+
+async def test_label_fetching():
+    """Test that MCP server can fetch all labels"""
+    print("="*60)
+    print("Testing MCP Server Label Fetching")
+    print("="*60)
+
+    # Initialize client (loads from ~/.config/claude/gitea.env and .env)
+    print("\n1. Initializing Gitea client...")
+    print("   Loading configuration from:")
+    print("   - System: ~/.config/claude/gitea.env")
+    print("   - Project: .env")
+
+    client = GiteaClient()
+    print(f"   ✅ Client initialized")
+    print(f"   - API URL: {client.base_url}")
+    print(f"   - Owner: {client.owner}")
+    print(f"   - Repo: {client.repo}")
+    print(f"   - Mode: {client.mode}")
+
+    # Initialize label tools
+    print("\n2. Initializing label tools...")
+    label_tools = LabelTools(client)
+    print("   ✅ Label tools initialized")
+
+    # Fetch all labels
+    print("\n3. Fetching labels from Gitea...")
+    result = await label_tools.get_labels()
+
+    org_labels = result['organization']
+    repo_labels = result['repository']
+    total_count = result['total_count']
+
+    print(f"   ✅ Labels fetched successfully")
+    print(f"   - Organization labels: {len(org_labels)}")
+    print(f"   - Repository labels: {len(repo_labels)}")
+    print(f"   - Total: {total_count}")
+
+    # Verify counts
+    print("\n4. Verifying label counts...")
+    expected_org = 27
+    expected_repo = 16
+    expected_total = 43
+
+    all_passed = True
+
+    if len(org_labels) == expected_org:
+        print(f"   ✅ Organization labels: {len(org_labels)} (expected: {expected_org})")
+    else:
+        print(f"   ❌ Organization labels: {len(org_labels)} (expected: {expected_org})")
+        all_passed = False
+
+    if len(repo_labels) == expected_repo:
+        print(f"   ✅ Repository labels: {len(repo_labels)} (expected: {expected_repo})")
+    else:
+        print(f"   ❌ Repository labels: {len(repo_labels)} (expected: {expected_repo})")
+        all_passed = False
+
+    if total_count == expected_total:
+        print(f"   ✅ Total labels: {total_count} (expected: {expected_total})")
+    else:
+        print(f"   ❌ Total labels: {total_count} (expected: {expected_total})")
+        all_passed = False
+
+    # Show label breakdown
+    print("\n5. Label Breakdown:")
+
+    # Categorize org labels
+    org_categories = {}
+    for label in org_labels:
+        category = label['name'].split('/')[0]
+        if category not in org_categories:
+            org_categories[category] = []
+        org_categories[category].append(label['name'])
+
+    print("\n   Organization Labels by Category:")
+    for category, labels in sorted(org_categories.items()):
+        print(f"   - {category}: {len(labels)} labels")
+        for label in sorted(labels):
+            print(f"      • {label}")
+
+    # Categorize repo labels
+    repo_categories = {}
+    for label in repo_labels:
+        category = label['name'].split('/')[0]
+        if category not in repo_categories:
+            repo_categories[category] = []
+        repo_categories[category].append(label['name'])
+
+    print("\n   Repository Labels by Category:")
+    for category, labels in sorted(repo_categories.items()):
+        print(f"   - {category}: {len(labels)} labels")
+        for label in sorted(labels):
+            print(f"      • {label}")
+
+    # Test label suggestion
+    print("\n6. Testing Label Suggestion:")
+    test_contexts = [
+        "Fix critical bug in authentication service causing login failures",
+        "Add new feature to export reports to PDF format",
+        "Refactor backend API to extract authentication service"
+    ]
+
+    for context in test_contexts:
+        suggested = await label_tools.suggest_labels(context)
+        print(f"\n   Context: \"{context}\"")
+        print(f"   Suggested labels: {', '.join(suggested)}")
+
+    # Final result
+    print("\n" + "="*60)
+    if all_passed:
+        print("✅ SUCCESS: MCP Server can fetch all 43 labels correctly!")
+        print("="*60)
+        return 0
+    else:
+        print("❌ FAILED: Label count mismatch detected")
+        print("="*60)
+        return 1
+
+if __name__ == "__main__":
+    exit_code = asyncio.run(test_label_fetching())
+    sys.exit(exit_code)