Make Enabled property of Target Control is working.
Consider the Above coding
Private Sub Label1_DragDrop(Source As Control, X As Single, Y As Single)
If TypeOf Source Is Label Then
Label1.Caption = Source.Caption
Label1.Enabled = False
End If
End Sub
Or
Another possiblity you are having blank Labels as target. So if the label's caption is blank then only it receives drag drop event.
Private Sub Label1_DragDrop(Source As Control, X As Single, Y As Single)
If Label1.Caption = "" And TypeOf Source Is Label Then
Label1.Caption = Source.Caption
End If
End Sub