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I want to know if I can have gmail auto create label based off the sender. For example if I receive an email from sarah@gmail.com I want gmail to to apply the filter sarah without me manually creating the label because I want every single email to be labeled in this nature. Is this possible?

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I dont know if gmail has that ability. But if you want to know more you can go to Gmail blog for current postings or you can browse the labs functionality in it. They do all sort of research in it. – RG-3 Jul 19 '12 at 22:32
If the first email is from Sarah, and the response if from Bob, and the response to that one is from Nancy, and the final one from Pete do you expect all four labels to be on the conversation.? – mhoran_psprep Jul 19 '12 at 23:12
is this so you can then filter emails from particular senders? – OrangeBox Jul 20 '12 at 0:02
"...I want every single email to be labeled in this nature..." Do you really want one label per email adress? If you want to see sarah@gmail.com emails you can just search for them -> from:sarah@gmail.com – elunicotomas Jul 20 '12 at 13:59

Currently Gmail doesn't support auto label creation as it doesn't know what to look for. It only filters emails automatically based on manually created labels. It needs some help to understand what you want to do. If you want Gmail to auto label e-mails from sarah@gmail.com, you need to tell it at least once to watch for and label all emails from sarah@gmail.com, and gmail will take care of the rest. An auto label Gmail function would completely mess up your e-mail labels unless programmed correctly to look for specific parameters.

P.S. I use their label feature a lot. Maybe a little too much. My inbox is quite colorful.

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Damn. I was hoping to create a label based on whatever is before the @ symbol. Ahh well. – Dylan Jones Jul 20 '12 at 3:37

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