diff --git a/cmd/main.go b/cmd/main.go
index 331d0611a..f2616ce12 100644
--- a/cmd/main.go
+++ b/cmd/main.go
@@ -173,7 +173,7 @@ func main() {
 			Client:                      mgr.GetClient(),
 			UnstructuredCachingClient:   unstructuredCachingClient,
 			SourceClusterClassNamespace: namespacesyncOptions.SourceNamespace,
-			TargetNamespaceFilter:       namespacesync.NamespaceHasLabelKey(namespacesyncOptions.TargetNamespaceLabelKey),
+			IsTargetNamespace:           namespacesync.NamespaceHasLabelKey(namespacesyncOptions.TargetNamespaceLabelKey),
 		}).SetupWithManager(
 			signalCtx,
 			mgr,
diff --git a/pkg/controllers/namespacesync/controller.go b/pkg/controllers/namespacesync/controller.go
index 448a5fef2..a7b8c5987 100644
--- a/pkg/controllers/namespacesync/controller.go
+++ b/pkg/controllers/namespacesync/controller.go
@@ -28,8 +28,8 @@ type Reconciler struct {
 	// SourceClusterClassNamespace is the namespace from which ClusterClasses are copied.
 	SourceClusterClassNamespace string
 
-	// TargetNamespaceFilter determines whether ClusterClasses should be copied to a given namespace.
-	TargetNamespaceFilter func(ns *corev1.Namespace) bool
+	// IsTargetNamespace determines whether ClusterClasses should be copied to a given namespace.
+	IsTargetNamespace func(ns *corev1.Namespace) bool
 }
 
 func (r *Reconciler) SetupWithManager(
@@ -37,8 +37,8 @@ func (r *Reconciler) SetupWithManager(
 	mgr ctrl.Manager,
 	options controller.Options,
 ) error {
-	if r.TargetNamespaceFilter == nil {
-		return fmt.Errorf("target Namespace filter is nil")
+	if r.IsTargetNamespace == nil {
+		return fmt.Errorf("define IsTargetNamespace function to use controller")
 	}
 
 	err := ctrl.NewControllerManagedBy(mgr).
@@ -52,12 +52,22 @@ func (r *Reconciler) SetupWithManager(
 						if !ok {
 							return false
 						}
-						return r.TargetNamespaceFilter(ns)
+						return r.IsTargetNamespace(ns)
 					},
 					UpdateFunc: func(e event.UpdateEvent) bool {
 						// Called when an object is already in the cache, and it is either updated,
 						// or fetched as part of a re-list (aka re-sync).
-						return false
+						nsOld, ok := e.ObjectOld.(*corev1.Namespace)
+						if !ok {
+							return false
+						}
+						nsNew, ok := e.ObjectNew.(*corev1.Namespace)
+						if !ok {
+							return false
+						}
+						// Only reconcile the namespace if the answer to the question "Is this a
+						// target namespace?" changed from no to yes.
+						return !r.IsTargetNamespace(nsOld) && r.IsTargetNamespace(nsNew)
 					},
 					DeleteFunc: func(e event.DeleteEvent) bool {
 						// Ignore deletes.
@@ -93,7 +103,7 @@ func (r *Reconciler) clusterClassToNamespaces(ctx context.Context, o client.Obje
 	rs := []ctrl.Request{}
 	for i := range namespaceList.Items {
 		ns := &namespaceList.Items[i]
-		if r.TargetNamespaceFilter(ns) {
+		if r.IsTargetNamespace(ns) {
 			rs = append(rs,
 				ctrl.Request{
 					NamespacedName: client.ObjectKeyFromObject(ns),
diff --git a/pkg/controllers/namespacesync/controller_test.go b/pkg/controllers/namespacesync/controller_test.go
index 93ee0dcc8..c97c7bab5 100644
--- a/pkg/controllers/namespacesync/controller_test.go
+++ b/pkg/controllers/namespacesync/controller_test.go
@@ -17,6 +17,38 @@ import (
 	"github.com/nutanix-cloud-native/cluster-api-runtime-extensions-nutanix/internal/test/builder"
 )
 
+func TestReconcileExistingNamespaceWithUpdatedLabels(t *testing.T) {
+	g := NewWithT(t)
+	timeout := 5 * time.Second
+
+	sourceClusterClassName, cleanup, err := createUniqueClusterClassAndTemplates(
+		sourceClusterClassNamespace,
+	)
+	g.Expect(err).ToNot(HaveOccurred())
+	defer func() {
+		g.Expect(cleanup()).To(Succeed())
+	}()
+
+	// Create namespace without label
+	targetNamespace, err := env.CreateNamespace(ctx, "target", map[string]string{})
+	g.Expect(err).ToNot(HaveOccurred())
+
+	// Label the namespace
+	targetNamespace.Labels[targetNamespaceLabelKey] = ""
+	err = env.Update(ctx, targetNamespace)
+	g.Expect(err).ToNot(HaveOccurred())
+
+	g.Eventually(func() error {
+		return verifyClusterClassAndTemplates(
+			env.Client,
+			sourceClusterClassName,
+			targetNamespace.Name,
+		)
+	},
+		timeout,
+	).Should(Succeed())
+}
+
 func TestReconcileNewNamespaces(t *testing.T) {
 	g := NewWithT(t)
 	timeout := 5 * time.Second
diff --git a/pkg/controllers/namespacesync/suite_test.go b/pkg/controllers/namespacesync/suite_test.go
index 76e79b54a..18b5c1e4a 100644
--- a/pkg/controllers/namespacesync/suite_test.go
+++ b/pkg/controllers/namespacesync/suite_test.go
@@ -58,7 +58,7 @@ func TestMain(m *testing.M) {
 			Client:                      mgr.GetClient(),
 			UnstructuredCachingClient:   unstructuredCachingClient,
 			SourceClusterClassNamespace: sourceClusterClassNamespace,
-			TargetNamespaceFilter:       NamespaceHasLabelKey(targetNamespaceLabelKey),
+			IsTargetNamespace:           NamespaceHasLabelKey(targetNamespaceLabelKey),
 		}).SetupWithManager(ctx, mgr, controller.Options{MaxConcurrentReconciles: 1}); err != nil {
 			panic(fmt.Sprintf("unable to create reconciler: %v", err))
 		}