BGP Label Update allows you to set up a Virtual Private Network (VPN) network so that the autonomous system boundary routers (ASBRs) exchange IPv4 routes with Multiprotocol Label Switching (MPLS) labels of the provider edge (PE) routers. In this scenario, Route reflectors (RRs) exchange VPNv4 routes and ASBR get relaxed to store those routes.

This results in improved scalability and simplifies the configuration. By using this feature, you can use non MPLS network as transit network, this helps you to transport all the IPv4 routes with labels over non MPLS network.

When you issue the neighbor send-label command under BGP configuration, the routers advertise to each other that they can then send MPLS labels with the routes. If the routers successfully negotiate their ability to send MPLS labels, the routers add MPLS labels to all outgoing BGP updates. This eliminates the need for using any label distribution protocol between the LSRs.(IS LDP Required For VPNv4 Labels)