diff --git a/packages/blocks/src/api/registration.js b/packages/blocks/src/api/registration.js
index ae12b0cfbcf49d..2f4bab2b5f2589 100644
--- a/packages/blocks/src/api/registration.js
+++ b/packages/blocks/src/api/registration.js
@@ -854,14 +854,6 @@ export const registerBlockBindingsSource = ( source ) => {
 	}
 
 	// Check the `label` property is correct.
-	if ( label && existingSource?.label ) {
-		warning(
-			'Block bindings "' +
-				name +
-				'" source label is already defined in the server.'
-		);
-		return;
-	}
 
 	if ( ! label && ! existingSource?.label ) {
 		warning( 'Block bindings source must contain a label.' );
@@ -873,6 +865,10 @@ export const registerBlockBindingsSource = ( source ) => {
 		return;
 	}
 
+	if ( label && existingSource?.label && label !== existingSource?.label ) {
+		warning( 'Block bindings "' + name + '" source label was overriden.' );
+	}
+
 	// Check the `usesContext` property is correct.
 	if ( usesContext && ! Array.isArray( usesContext ) ) {
 		warning( 'Block bindings source usesContext must be an array.' );
diff --git a/packages/blocks/src/api/test/registration.js b/packages/blocks/src/api/test/registration.js
index 99ca6390d2d3b1..73f310bbf04dc7 100644
--- a/packages/blocks/src/api/test/registration.js
+++ b/packages/blocks/src/api/test/registration.js
@@ -1512,20 +1512,38 @@ describe( 'blocks', () => {
 			expect( getBlockBindingsSource( 'core/testing' ) ).toBeUndefined();
 		} );
 
-		it( 'should not override label from the server', () => {
+		it( 'should override label from the server', () => {
 			// Simulate bootstrap source from the server.
 			registerBlockBindingsSource( {
-				name: 'core/server',
+				name: 'core/testing',
 				label: 'Server label',
 			} );
 			// Override the source with a different label in the client.
 			registerBlockBindingsSource( {
-				name: 'core/server',
+				name: 'core/testing',
 				label: 'Client label',
 			} );
 			expect( console ).toHaveWarnedWith(
-				'Block bindings "core/server" source label is already defined in the server.'
+				'Block bindings "core/testing" source label was overriden.'
 			);
+			const source = getBlockBindingsSource( 'core/testing' );
+			unregisterBlockBindingsSource( 'core/testing' );
+			expect( source.label ).toEqual( 'Client label' );
+		} );
+
+		it( 'should keep label from the server when not defined in the client', () => {
+			// Simulate bootstrap source from the server.
+			registerBlockBindingsSource( {
+				name: 'core/testing',
+				label: 'Server label',
+			} );
+			// Override the source with a different label in the client.
+			registerBlockBindingsSource( {
+				name: 'core/testing',
+			} );
+			const source = getBlockBindingsSource( 'core/testing' );
+			unregisterBlockBindingsSource( 'core/testing' );
+			expect( source.label ).toEqual( 'Server label' );
 		} );
 
 		// Check the `usesContext` array is correct.
diff --git a/packages/blocks/src/store/reducer.js b/packages/blocks/src/store/reducer.js
index 16594a79271e6c..ac652b91890319 100644
--- a/packages/blocks/src/store/reducer.js
+++ b/packages/blocks/src/store/reducer.js
@@ -403,8 +403,7 @@ export function blockBindingsSources( state = {}, action ) {
 			return {
 				...state,
 				[ action.name ]: {
-					// Don't override the label if it's already set.
-					label: state[ action.name ]?.label || action.label,
+					label: action.label || state[ action.name ]?.label,
 					usesContext: getMergedUsesContext(
 						state[ action.name ]?.usesContext,
 						action.usesContext