diff --git a/sdk/metrics/src/main/java/io/opentelemetry/sdk/metrics/processor/BaggageLabelsProcessor.java b/sdk/metrics/src/main/java/io/opentelemetry/sdk/metrics/processor/BaggageLabelsProcessor.java
new file mode 100644
index 00000000000..ae297337b3a
--- /dev/null
+++ b/sdk/metrics/src/main/java/io/opentelemetry/sdk/metrics/processor/BaggageLabelsProcessor.java
@@ -0,0 +1,31 @@
+/*
+ * Copyright The OpenTelemetry Authors
+ * SPDX-License-Identifier: Apache-2.0
+ */
+
+package io.opentelemetry.sdk.metrics.processor;
+
+import io.opentelemetry.api.baggage.Baggage;
+import io.opentelemetry.api.metrics.common.Labels;
+import io.opentelemetry.api.metrics.common.LabelsBuilder;
+import io.opentelemetry.context.Context;
+
+/**
+ * A labels processor which extracts labels from {@link io.opentelemetry.api.baggage.Baggage}.
+ * Delegates actual extraction implementation to {@link BaggageMetricsLabelsExtractor}
+ */
+public final class BaggageLabelsProcessor implements LabelsProcessor {
+  private final BaggageMetricsLabelsExtractor baggageMetricsLabelsExtractor;
+
+  public BaggageLabelsProcessor(BaggageMetricsLabelsExtractor baggageMetricsLabelsExtractor) {
+    this.baggageMetricsLabelsExtractor = baggageMetricsLabelsExtractor;
+  }
+
+  @Override
+  public Labels onLabelsBound(Context ctx, Labels labels) {
+    LabelsBuilder labelsBuilder = labels.toBuilder();
+    baggageMetricsLabelsExtractor.fromBaggage(Baggage.fromContext(ctx)).forEach(labelsBuilder::put);
+
+    return labelsBuilder.build();
+  }
+}
diff --git a/sdk/metrics/src/main/java/io/opentelemetry/sdk/metrics/processor/BaggageMetricsLabelsExtractor.java b/sdk/metrics/src/main/java/io/opentelemetry/sdk/metrics/processor/BaggageMetricsLabelsExtractor.java
new file mode 100644
index 00000000000..74a4cfd74a9
--- /dev/null
+++ b/sdk/metrics/src/main/java/io/opentelemetry/sdk/metrics/processor/BaggageMetricsLabelsExtractor.java
@@ -0,0 +1,15 @@
+/*
+ * Copyright The OpenTelemetry Authors
+ * SPDX-License-Identifier: Apache-2.0
+ */
+
+package io.opentelemetry.sdk.metrics.processor;
+
+import io.opentelemetry.api.baggage.Baggage;
+import io.opentelemetry.api.metrics.common.Labels;
+
+/** Uses {@link Baggage} to extract labels for metrics. Used with {@link BaggageLabelsProcessor} */
+public interface BaggageMetricsLabelsExtractor {
+
+  Labels fromBaggage(Baggage ctx);
+}
diff --git a/sdk/metrics/src/test/java/io/opentelemetry/sdk/metrics/processor/BaggageLabelsProcessorTest.java b/sdk/metrics/src/test/java/io/opentelemetry/sdk/metrics/processor/BaggageLabelsProcessorTest.java
new file mode 100644
index 00000000000..3fbf5c0d195
--- /dev/null
+++ b/sdk/metrics/src/test/java/io/opentelemetry/sdk/metrics/processor/BaggageLabelsProcessorTest.java
@@ -0,0 +1,29 @@
+/*
+ * Copyright The OpenTelemetry Authors
+ * SPDX-License-Identifier: Apache-2.0
+ */
+
+package io.opentelemetry.sdk.metrics.processor;
+
+import static org.assertj.core.api.Assertions.assertThat;
+
+import io.opentelemetry.api.metrics.common.Labels;
+import io.opentelemetry.api.metrics.common.LabelsBuilder;
+import io.opentelemetry.context.Context;
+import org.junit.jupiter.api.Test;
+
+public class BaggageLabelsProcessorTest {
+
+  @Test
+  void testLabelsExtractedAndAdded() {
+    Labels extractedLabels = Labels.of("aa", "bb");
+    BaggageMetricsLabelsExtractor extractor = ctx -> extractedLabels;
+    BaggageLabelsProcessor labelsProcessor = new BaggageLabelsProcessor(extractor);
+    Labels originalLabels = Labels.of("a", "b");
+    Labels newLabels = labelsProcessor.onLabelsBound(Context.current(), originalLabels);
+
+    LabelsBuilder mergedLabels = newLabels.toBuilder();
+    extractedLabels.asMap().forEach((k, v) -> newLabels.toBuilder().put(k, v));
+    assertThat(newLabels).isEqualTo(mergedLabels.build());
+  }
+}