diff --git a/label-application-rule-config-service-impl/src/main/java/org/hypertrace/label/application/rule/config/service/LabelApplicationRuleValidatorImpl.java b/label-application-rule-config-service-impl/src/main/java/org/hypertrace/label/application/rule/config/service/LabelApplicationRuleValidatorImpl.java
index fcd21b53..48e9b51d 100644
--- a/label-application-rule-config-service-impl/src/main/java/org/hypertrace/label/application/rule/config/service/LabelApplicationRuleValidatorImpl.java
+++ b/label-application-rule-config-service-impl/src/main/java/org/hypertrace/label/application/rule/config/service/LabelApplicationRuleValidatorImpl.java
@@ -180,12 +180,12 @@ public void validateLabelExpression(Action.DynamicLabel dynamicLabel) {
                 validKeys.add(tokenExtractionRule.getAlias());
               }
             });
-    Pattern pattern = Pattern.compile("\\{(\\\\}|[^}])*}");
+    Pattern pattern = Pattern.compile("\\$\\{(\\\\}|[^}])*}");
     Matcher matcher = pattern.matcher(labelExpression);
     int startOffset = 0;
     while (startOffset < labelExpression.length() && matcher.find(startOffset)) {
       String match = matcher.group();
-      String key = match.substring(1, match.length() - 1);
+      String key = match.substring(2, match.length() - 1);
       startOffset = startOffset + matcher.end();
       if (!validKeys.contains(key)) {
         throwInvalidArgumentException("Invalid key name in label expression");
diff --git a/label-application-rule-config-service-impl/src/test/java/org/hypertrace/label/application/rule/config/service/LabelApplicationRuleValidatorTest.java b/label-application-rule-config-service-impl/src/test/java/org/hypertrace/label/application/rule/config/service/LabelApplicationRuleValidatorTest.java
index ff5cec0c..ae717967 100644
--- a/label-application-rule-config-service-impl/src/test/java/org/hypertrace/label/application/rule/config/service/LabelApplicationRuleValidatorTest.java
+++ b/label-application-rule-config-service-impl/src/test/java/org/hypertrace/label/application/rule/config/service/LabelApplicationRuleValidatorTest.java
@@ -197,7 +197,7 @@ void validateLabelExpression() {
         Condition.newBuilder().setLeafCondition(errorLeafCondition).build();
     CreateLabelApplicationRuleRequest request1 =
         buildCreateCreateLabelApplicationRuleRequest(
-            "Label Expression Rule", matchingCondition, Optional.of("${status}_{wrong-key}"));
+            "Label Expression Rule", matchingCondition, Optional.of("${status}_${wrong-key}"));
     Throwable exception =
         assertThrows(
             StatusRuntimeException.class,
@@ -206,7 +206,7 @@ void validateLabelExpression() {
             });
     CreateLabelApplicationRuleRequest request2 =
         buildCreateCreateLabelApplicationRuleRequest(
-            "Label Expression Rule", matchingCondition, Optional.of("${status}_{method}"));
+            "Label Expression Rule", matchingCondition, Optional.of("${status}_${method}"));
     assertDoesNotThrow(
         () -> {
           labelApplicationRuleValidator.validateOrThrow(REQUEST_CONTEXT, request2);