diff --git a/pkg/addonmanager/controllers/addoninstall/controller.go b/pkg/addonmanager/controllers/addoninstall/controller.go
index 56209a614..ebac29bec 100644
--- a/pkg/addonmanager/controllers/addoninstall/controller.go
+++ b/pkg/addonmanager/controllers/addoninstall/controller.go
@@ -2,13 +2,13 @@ package addoninstall
 
 import (
 	"context"
-	"fmt"
 
 	"github.com/openshift/library-go/pkg/controller/factory"
 	"github.com/openshift/library-go/pkg/operator/events"
 	"k8s.io/apimachinery/pkg/api/errors"
 	"k8s.io/apimachinery/pkg/api/meta"
 	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
+	"k8s.io/apimachinery/pkg/labels"
 	"k8s.io/apimachinery/pkg/runtime"
 	"k8s.io/klog/v2"
 	"open-cluster-management.io/addon-framework/pkg/agent"
@@ -41,7 +41,7 @@ func NewAddonInstallController(
 		managedClusterLister:      clusterInformers.Lister(),
 		managedClusterAddonLister: addonInformers.Lister(),
 		agentAddons:               agentAddons,
-		eventRecorder:             recorder.WithComponentSuffix(fmt.Sprintf("addon-install-controller")),
+		eventRecorder:             recorder.WithComponentSuffix("addon-install-controller"),
 	}
 
 	return factory.New().WithFilteredEventsInformersQueueKeyFunc(
@@ -65,14 +65,14 @@ func NewAddonInstallController(
 			},
 			clusterInformers.Informer(),
 		).
-		WithSync(c.sync).ToController(fmt.Sprintf("addon-install-controller"), recorder)
+		WithSync(c.sync).ToController("addon-install-controller", recorder)
 }
 
 func (c *addonInstallController) sync(ctx context.Context, syncCtx factory.SyncContext) error {
 	clusterName := syncCtx.QueueKey()
 	klog.V(4).Infof("Reconciling addon deploy on cluster %q", clusterName)
 
-	_, err := c.managedClusterLister.Get(clusterName)
+	cluster, err := c.managedClusterLister.Get(clusterName)
 	if errors.IsNotFound(err) {
 		return nil
 	}
@@ -87,6 +87,24 @@ func (c *addonInstallController) sync(ctx context.Context, syncCtx factory.SyncC
 
 		switch addon.GetAgentAddonOptions().InstallStrategy.Type {
 		case agent.InstallAll:
+			return c.applyAddon(ctx, addonName, clusterName, addon.GetAgentAddonOptions().InstallStrategy.InstallNamespace)
+		case agent.InstallByLabel:
+			labelSelector := addon.GetAgentAddonOptions().InstallStrategy.LabelSelector
+			if labelSelector == nil {
+				klog.Warningf("installByLabel strategy is set, but label selector is not set")
+				return nil
+			}
+
+			selector, err := metav1.LabelSelectorAsSelector(labelSelector)
+			if err != nil {
+				klog.Warningf("labels selector is not correct: %v", err)
+				return nil
+			}
+
+			if !selector.Matches(labels.Set(cluster.Labels)) {
+				return nil
+			}
+
 			return c.applyAddon(ctx, addonName, clusterName, addon.GetAgentAddonOptions().InstallStrategy.InstallNamespace)
 		}
 	}
diff --git a/pkg/addonmanager/controllers/addoninstall/controller_test.go b/pkg/addonmanager/controllers/addoninstall/controller_test.go
index ebc4f92fd..5f276fb53 100644
--- a/pkg/addonmanager/controllers/addoninstall/controller_test.go
+++ b/pkg/addonmanager/controllers/addoninstall/controller_test.go
@@ -6,6 +6,7 @@ import (
 	"time"
 
 	"github.com/openshift/library-go/pkg/operator/events/eventstesting"
+	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
 	"k8s.io/apimachinery/pkg/runtime"
 	clienttesting "k8s.io/client-go/testing"
 	"open-cluster-management.io/addon-framework/pkg/addonmanager/addontesting"
@@ -34,6 +35,13 @@ func (t *testAgent) GetAgentAddonOptions() agent.AgentAddonOptions {
 	}
 }
 
+func newManagedClusterWithLabel(name, key, value string) *clusterv1.ManagedCluster {
+	cluster := addontesting.NewManagedCluster(name)
+	cluster.Labels = map[string]string{key: value}
+
+	return cluster
+}
+
 func TestReconcile(t *testing.T) {
 	cases := []struct {
 		name                 string
@@ -77,6 +85,38 @@ func TestReconcile(t *testing.T) {
 			},
 			testaddon: &testAgent{name: "test", strategy: agent.InstallAllStrategy("test")},
 		},
+		{
+			name:                 "selector install strategy with unmatched cluster",
+			addon:                []runtime.Object{},
+			cluster:              []runtime.Object{addontesting.NewManagedCluster("cluster1")},
+			validateAddonActions: addontesting.AssertNoActions,
+			testaddon: &testAgent{name: "test", strategy: agent.InstallByLabelStrategy("test", metav1.LabelSelector{
+				MatchLabels: map[string]string{"mode": "dev"},
+			})},
+		},
+		{
+			name:                 "selector install strategy with nil label selector",
+			addon:                []runtime.Object{},
+			cluster:              []runtime.Object{addontesting.NewManagedCluster("cluster1")},
+			validateAddonActions: addontesting.AssertNoActions,
+			testaddon:            &testAgent{name: "test", strategy: &agent.InstallStrategy{Type: agent.InstallByLabel}},
+		},
+		{
+			name:    "selector install strategy with matched cluster",
+			addon:   []runtime.Object{},
+			cluster: []runtime.Object{newManagedClusterWithLabel("cluster1", "mode", "dev")},
+			validateAddonActions: func(t *testing.T, actions []clienttesting.Action) {
+				addontesting.AssertActions(t, actions, "create")
+				actual := actions[0].(clienttesting.CreateActionImpl).Object
+				addOn := actual.(*addonapiv1alpha1.ManagedClusterAddOn)
+				if addOn.Spec.InstallNamespace != "test" {
+					t.Errorf("Install namespace is not correct, expected test but got %s", addOn.Spec.InstallNamespace)
+				}
+			},
+			testaddon: &testAgent{name: "test", strategy: agent.InstallByLabelStrategy("test", metav1.LabelSelector{
+				MatchLabels: map[string]string{"mode": "dev"},
+			})},
+		},
 	}
 
 	for _, c := range cases {
diff --git a/pkg/agent/inteface.go b/pkg/agent/inteface.go
index 1eac62c5c..5d211c6bc 100644
--- a/pkg/agent/inteface.go
+++ b/pkg/agent/inteface.go
@@ -4,6 +4,7 @@ import (
 	"fmt"
 
 	certificatesv1 "k8s.io/api/certificates/v1"
+	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
 	"k8s.io/apimachinery/pkg/runtime"
 	addonapiv1alpha1 "open-cluster-management.io/api/addon/v1alpha1"
 	clusterv1 "open-cluster-management.io/api/cluster/v1"
@@ -104,7 +105,13 @@ type RegistrationOption struct {
 
 type StrategyType string
 
-const InstallAll StrategyType = "*"
+const (
+	// InstallAll indicate to install addon to all clusters
+	InstallAll StrategyType = "*"
+
+	// InstallByLabel indicate to install addon based on clusters' label
+	InstallByLabel StrategyType = "LabelSelector"
+)
 
 // InstallStrategy is the installation strategy of the manifests prescribed by Manifests(..).
 type InstallStrategy struct {
@@ -113,6 +120,9 @@ type InstallStrategy struct {
 	Type StrategyType
 	// InstallNamespace is target deploying namespace in the managed cluster upon automatic addon installation.
 	InstallNamespace string
+
+	// LabelSelector is used to filter clusters based on label. It is only used when strategyType is InstallByLabel
+	LabelSelector *metav1.LabelSelector
 }
 
 type HealthProber struct {
@@ -173,6 +183,14 @@ func InstallAllStrategy(installNamespace string) *InstallStrategy {
 	}
 }
 
+func InstallByLabelStrategy(installNamespace string, selector metav1.LabelSelector) *InstallStrategy {
+	return &InstallStrategy{
+		Type:             InstallByLabel,
+		InstallNamespace: installNamespace,
+		LabelSelector:    &selector,
+	}
+}
+
 // ApprovalAllCSRs returns true for all csrs.
 func ApprovalAllCSRs(cluster *clusterv1.ManagedCluster, addon *addonapiv1alpha1.ManagedClusterAddOn, csr *certificatesv1.CertificateSigningRequest) bool {
 	return true