Data protection
Sensitivity labels and data loss prevention in Microsoft 365, explained
Sensitivity labels vs DLP in Microsoft 365: what each Purview feature does, how they work together and differ from retention, and licensing.
Where to start: sensitivity labels and DLP
Both are set up in the Microsoft Purview portal (purview.microsoft.com). The plan decides which parts are available, so the licence comes first.
- Check the plan includes labels and DLPMicrosoft's Purview service description lists manual labels and DLP for Exchange, SharePoint and OneDrive in Business Premium and Microsoft 365 E3/E5, not Business Basic or Standard. Automatic labelling, Teams chat DLP and Endpoint DLP are E5-level.Licensing as Microsoft lists it
- Create the labelsGo to Solutions > Information Protection > Sensitivity labels > Create a label, and choose where each label applies. Microsoft's example set is Personal, Public, General, Confidential and Highly Confidential.Full steps for labels
- Publish the labels with a label policyGo to Solutions > Information Protection > Publishing policies > Publish label. Microsoft says labels can't be used in apps until they're in a label policy, and to allow up to 24 hours for changes to appear.Full steps for label policies
- Create a DLP policy and run it in simulation modeIn the Data loss prevention solution, go to Policies > Create policy. Microsoft describes simulation mode as enforcing no actions while auditing events, so the impact can be checked before the policy is turned on.Full steps for DLP
- Plan retention separatelyRetention keeps or deletes content for set periods. Microsoft describes it as a different feature that doesn't encrypt or restrict access the way a label can.How retention differs
Based on Microsoft Learn's sensitivity label, DLP and retention pages and the Microsoft Purview service description, checked 21 October 2026. Menus and licensing change; Microsoft's pages have the latest steps.
Key points
- Microsoft describes a sensitivity label as "like a stamp that you apply" to content, and says the protection a label applies then stays with the content.
- Microsoft describes data loss prevention (DLP) as policies that help prevent people from inappropriately sharing sensitive data, using deep content analysis.
- Microsoft's retention documentation describes retention as keeping or deleting content for set periods, which is a different job from protecting it.
- Microsoft says labelling a container, such as a SharePoint site or a team, doesn't label the items in it.
Microsoft Purview includes two features that are often mentioned together: sensitivity labels and data loss prevention (DLP). In Microsoft’s terms, a sensitivity label classifies an item and can carry protection such as encryption wherever it goes, while a DLP policy watches where sensitive content is shared and can warn or block. They work on the same problem, which is sensitive information ending up with people who shouldn’t have it, but they do different jobs. A third Purview feature, retention, is sometimes confused with both. This guide explains what sensitivity labels and DLP each do in Microsoft 365, as Microsoft’s documentation describes them, how they differ, and which licences Microsoft lists for them.
Sensitivity labels: classifying and protecting content
Microsoft says sensitivity labels “let you classify and protect your organization’s data, while making sure that user productivity and their ability to collaborate isn’t hindered”. Its documentation compares applying a label to applying “a stamp”. Each item can have one sensitivity label at a time.
Organisations create their own labels. Microsoft gives example categories such as Personal, Public, General, Confidential and Highly Confidential.
According to Microsoft, a label can:
- apply encryption and access control, meaning which people or groups can open an email or document, what they can do with it, and for how long
- add content markings, such as headers, footers or watermarks (Microsoft says watermarks can be applied to documents and Loop components and pages, but not to email or meeting invites)
- protect containers, such as Teams, Microsoft 365 Groups and SharePoint sites, by controlling settings like privacy, external sharing and access from unmanaged devices
- be applied automatically, or recommended to users, depending on licensing
- simply classify, without any protection settings at all.
Two points from Microsoft’s description stand out. First, Microsoft says the protection a label enforces “then stays with the content”. Second, Microsoft says labelling a container such as a SharePoint site, Teams site, Viva Engage community or Loop workspace “doesn’t label the items in them”.
Microsoft also notes that sensitivity labels are different from Outlook’s built-in sensitivity levels, which “indicate the sender’s intention but can’t provide data security”.
Data loss prevention: rules about where sensitive data can go
Microsoft describes DLP as a way to “help prevent your users from inappropriately sharing sensitive data with people who shouldn’t have it”. Administrators define DLP policies that look for sensitive content and decide what happens when someone tries to share or move it.
Microsoft says DLP uses “deep content analysis - not a simple text scan”. That includes keywords, patterns, validation checks and machine learning. Policies can look for built-in sensitive information types (such as credit card numbers) and can also act on items that carry a particular sensitivity label.
Microsoft lists the places DLP can cover, depending on licence. These include Exchange, SharePoint, OneDrive, Teams chat and channel messages, Office apps, Windows and macOS devices, on-premises file shares, and Microsoft 365 Copilot and Copilot Chat (marked as preview). The guide to SharePoint oversharing and Microsoft 365 Copilot explains why existing permissions matter for Copilot.
The actions Microsoft describes include:
- showing a policy tip that warns the person they may be sharing something sensitive
- blocking the action, with or without an option to override and give a reason
- moving sensitive files at rest to a quarantine location
- hiding sensitive information in Teams chat.
Microsoft’s guidance describes running new policies in simulation mode first, where actions aren’t applied, so the impact can be evaluated before the policy is enforced. It also says DLP-monitored activities are recorded in the Microsoft 365 audit log, and that DLP “does not scan or match previously existing email items that are stored in a mailbox or archive”.
How labels and DLP differ
Put simply, in the terms Microsoft’s documentation uses:
- A sensitivity label travels with the item and can carry its own protection, such as encryption, wherever the item goes.
- A DLP policy watches activity in the locations it covers and can warn or block when sensitive content is about to be shared in a way the policy doesn’t allow.
The two can work together. A DLP policy can use a sensitivity label as one of its conditions, so content labelled “Confidential”, for example, can be blocked from being emailed outside the organisation.
Retention is a different job
Microsoft’s retention documentation describes retention policies and retention labels as tools to retain content (prevent permanent deletion) and/or delete it after a set period. Microsoft lists reasons such as complying with regulations that require content to be kept, and reducing risk by deleting old content that no longer needs to be kept.
Retention doesn’t encrypt or restrict access in the way a sensitivity label can. Microsoft also notes that, unlike sensitivity labels, retention labels “don’t persist if the content is moved outside Microsoft 365”. Microsoft’s sensitivity labels page states that documents and emails can have both a sensitivity label and a retention label.
How long any organisation is required to keep records depends on its own legal and regulatory obligations, which this site doesn’t advise on.
Licensing, as Microsoft lists it
Microsoft’s Purview service description is the authoritative list. As read on 21 October 2026, it shows:
- Manual sensitivity labelling and DLP for Exchange, SharePoint and OneDrive listed for Microsoft 365 Business Premium, Microsoft 365 E3/E5 and Office 365 E3/E5, among others. Business Basic and Business Standard aren’t listed.
- DLP for Teams chat and Endpoint DLP aren’t listed for Business Premium or Microsoft 365 E3.
- Automatic labelling (service-side and client-side), DLP for Teams chat and Endpoint DLP listed for E5-level plans and specific Purview add-ons.
Microsoft’s labels page adds that Office apps support sensitivity labels with a subscription version of Office, such as Microsoft 365 Apps for enterprise, and that people apply labels while signed in with their Microsoft 365 work or school account.
The service description also contains this sentence, next to its note on scanner-based discovery: “Sensitivity labeling, including automatic or policy-based labeling, requires a Microsoft 365 E5 license or Microsoft 365 Information Protection and Governance (IPG).” Its feature table, as read on 21 October 2026, lists manual labelling for Business Premium and E3, and automatic labelling for E5-level plans. Where the two readings matter for a particular tenant, Microsoft or a licensing partner can confirm.
The Microsoft 365 licensing and security features reference compares which plans Microsoft lists for each Purview feature.
How to create and publish sensitivity labels
Based on Microsoft’s instructions (checked October 2026). Menus can change; Microsoft’s create sensitivity labels page has the latest steps and the permissions needed.
- In the Microsoft Purview portal, go to Solutions > Information Protection > Sensitivity labels.
- Select + Create a label. On Define the scope for this label, choose where it appears (for example files and emails), then follow the prompts for its settings.
- To make labels available, go to Solutions > Information Protection > Publishing policies.
- On Label policies, select Publish label, choose the labels to publish, and follow the prompts to choose who gets them. Microsoft says completing the policy publishes it automatically.
Microsoft says labels can’t be selected in apps or services until they’re added to a label policy, and to allow up to 24 hours for label and policy changes to reach apps. It describes groups, rather than individual users, as the preferred recipients of a policy.
How to create a DLP policy in simulation mode
Based on Microsoft’s instructions (checked October 2026). Microsoft’s example DLP policy walkthrough has the full steps for one scenario.
- In the Microsoft Purview portal, open the Data loss prevention solution.
- Go to Policies > + Create policy, then choose the type of policy and the locations it covers.
- Choose the conditions (such as a sensitive information type or a sensitivity label) and the actions, following the prompts.
- At the end, select Run the policy in simulation mode, then Submit.
Microsoft describes simulation mode as running without enforcing actions, so the impact can be evaluated before the policy is turned on. Microsoft also says DLP-monitored activities are recorded in the Microsoft 365 audit log.
Things that change
Microsoft regularly adds new DLP locations (some, such as Copilot coverage, are marked as preview on Microsoft’s pages) and adjusts which plans include which Purview features. The pages linked on this guide are the places to confirm what is current.
Common questions
What’s the difference between sensitivity labels and DLP in Microsoft 365?
A sensitivity label travels with an item and can carry its own protection, such as encryption, wherever it goes. A DLP policy watches activity in the locations it covers and can warn or block when sensitive content is about to be shared in a way the policy doesn’t allow. The two can work together, with a label used as a DLP condition. How labels and DLP differ explains this.
Does Microsoft 365 Business Premium include sensitivity labels and DLP?
Microsoft’s Purview service description, as read on 21 October 2026, lists manual sensitivity labelling and DLP for Exchange, SharePoint and OneDrive for Business Premium. It doesn’t list DLP for Teams chat or Endpoint DLP for Business Premium, and lists automatic labelling for E5-level plans and specific add-ons. Business Basic and Business Standard aren’t listed. Licensing, as Microsoft lists it has the detail and a caveat.
Are sensitivity labels the same as retention labels?
No. Microsoft describes retention policies and labels as tools to keep content or delete it after a set period, and retention doesn’t encrypt or restrict access the way a sensitivity label can. Microsoft notes retention labels “don’t persist if the content is moved outside Microsoft 365”, and that an item can have both kinds of label. Retention is a different job covers the difference.
How do I create sensitivity labels in Microsoft Purview?
Microsoft’s steps start in the Purview portal under Solutions > Information Protection > Sensitivity labels, where you select Create a label and choose its scope. Labels then have to be published in a label policy before they can be selected in apps. Microsoft says to allow up to 24 hours for label and policy changes to reach apps. How to create and publish sensitivity labels lists each step.
Can I test a DLP policy before it blocks anything?
Yes. Microsoft’s guidance describes running new DLP policies in simulation mode first, where actions aren’t applied, so the impact can be evaluated before the policy is enforced. The option, Run the policy in simulation mode, is chosen at the end of creating the policy in the Purview portal’s Data loss prevention solution. How to create a DLP policy in simulation mode has Microsoft’s steps.
Does labelling a SharePoint site label the files in it?
No. Microsoft says labelling a container such as a SharePoint site, Teams site, Viva Engage community or Loop workspace “doesn’t label the items in them”. Container labels control settings like privacy, external sharing and access from unmanaged devices. Microsoft also says the protection a label enforces on an item “then stays with the content”. Sensitivity labels: classifying and protecting content explains both.