diff --git a/blueprints/factories/project-factory/main.tf b/blueprints/factories/project-factory/main.tf
index 7d173a11a0..9a230063c6 100644
--- a/blueprints/factories/project-factory/main.tf
+++ b/blueprints/factories/project-factory/main.tf
@@ -33,11 +33,13 @@ module "projects" {
   iam                     = try(each.value.iam, {})
   iam_bindings            = try(each.value.iam_bindings, {})
   iam_bindings_additive   = try(each.value.iam_bindings_additive, {})
-  labels                  = each.value.labels
-  lien_reason             = try(each.value.lien_reason, null)
-  logging_data_access     = try(each.value.logging_data_access, {})
-  logging_exclusions      = try(each.value.logging_exclusions, {})
-  logging_sinks           = try(each.value.logging_sinks, {})
+  labels = merge(
+    each.value.labels, var.data_merges.labels
+  )
+  lien_reason         = try(each.value.lien_reason, null)
+  logging_data_access = try(each.value.logging_data_access, {})
+  logging_exclusions  = try(each.value.logging_exclusions, {})
+  logging_sinks       = try(each.value.logging_sinks, {})
   metric_scopes = distinct(concat(
     each.value.metric_scopes, var.data_merges.metric_scopes
   ))
diff --git a/tests/blueprints/factories/project_factory/examples/example.yaml b/tests/blueprints/factories/project_factory/examples/example.yaml
index d1eb054eaf..086fbd55c7 100644
--- a/tests/blueprints/factories/project_factory/examples/example.yaml
+++ b/tests/blueprints/factories/project_factory/examples/example.yaml
@@ -33,6 +33,7 @@ values:
     folder_id: "12345678"
     labels:
       app: app-1
+      environment: test
       team: foo
     name: test-pf-prj-app-1
     org_id: null
@@ -64,6 +65,7 @@ values:
     folder_id: "12345678"
     labels:
       app: app-1
+      environment: test
       team: foo
     name: test-pf-prj-app-2
     org_id: null