diff --git a/packages/frontend/core/src/modules/explorer/views/nodes/tag/index.tsx b/packages/frontend/core/src/modules/explorer/views/nodes/tag/index.tsx
index 3487310cdc..d97b689b23 100644
--- a/packages/frontend/core/src/modules/explorer/views/nodes/tag/index.tsx
+++ b/packages/frontend/core/src/modules/explorer/views/nodes/tag/index.tsx
@@ -28,10 +28,8 @@ export const ExplorerTagNode = ({
   operations: additionalOperations,
   dropEffect,
   canDrop,
-  defaultRenaming,
 }: {
   tagId: string;
-  defaultRenaming?: boolean;
 } & GenericExplorerNode) => {
   const t = useI18n();
   const { tagService, globalContextService } = useServices({
@@ -179,7 +177,6 @@ export const ExplorerTagNode = ({
       setCollapsed={setCollapsed}
       to={`/tag/${tagId}`}
       active={active}
-      defaultRenaming={defaultRenaming}
       reorderable={reorderable}
       onRename={handleRename}
       canDrop={handleCanDrop}
diff --git a/packages/frontend/core/src/modules/explorer/views/sections/tags/index.tsx b/packages/frontend/core/src/modules/explorer/views/sections/tags/index.tsx
index 465367008c..10d331d29d 100644
--- a/packages/frontend/core/src/modules/explorer/views/sections/tags/index.tsx
+++ b/packages/frontend/core/src/modules/explorer/views/sections/tags/index.tsx
@@ -1,6 +1,5 @@
 import { IconButton } from '@affine/component';
 import { ExplorerTreeRoot } from '@affine/core/modules/explorer/views/tree';
-import type { Tag } from '@affine/core/modules/tag';
 import { TagService } from '@affine/core/modules/tag';
 import { useI18n } from '@affine/i18n';
 import { track } from '@affine/track';
@@ -11,6 +10,7 @@ import { useCallback, useEffect, useState } from 'react';
 import { ExplorerService } from '../../../services/explorer';
 import { CollapsibleSection } from '../../layouts/collapsible-section';
 import { ExplorerTagNode } from '../../nodes/tag';
+import { ExplorerTreeNodeRenameModal as CreateTagModal } from '../../tree/node';
 import { RootEmpty } from './empty';
 import * as styles from './styles.css';
 
@@ -21,25 +21,28 @@ export const ExplorerTags = () => {
   });
   const explorerSection = explorerService.sections.tags;
   const collapsed = useLiveData(explorerSection.collapsed$);
-  const [createdTag, setCreatedTag] = useState<Tag | null>(null);
+  const [creating, setCreating] = useState(false);
   const tags = useLiveData(tagService.tagList.tags$);
 
   const t = useI18n();
 
-  const handleCreateNewFavoriteDoc = useCallback(() => {
-    const newTags = tagService.tagList.createTag(
-      t['com.affine.rootAppSidebar.tags.new-tag'](),
-      tagService.randomTagColor()
-    );
-    setCreatedTag(newTags);
-    track.$.navigationPanel.organize.createOrganizeItem({ type: 'tag' });
-    explorerSection.setCollapsed(false);
-  }, [explorerSection, t, tagService]);
+  const handleCreateNewTag = useCallback(
+    (name: string) => {
+      tagService.tagList.createTag(name, tagService.randomTagColor());
+      track.$.navigationPanel.organize.createOrganizeItem({ type: 'tag' });
+      explorerSection.setCollapsed(false);
+    },
+    [explorerSection, tagService]
+  );
 
   useEffect(() => {
-    if (collapsed) setCreatedTag(null); // reset created tag to clear the renaming state
+    if (collapsed) setCreating(false);
   }, [collapsed]);
 
+  const handleOpenCreateModal = useCallback(() => {
+    setCreating(true);
+  }, []);
+
   return (
     <CollapsibleSection
       name="tags"
@@ -47,16 +50,26 @@ export const ExplorerTags = () => {
       headerClassName={styles.draggedOverHighlight}
       title={t['com.affine.rootAppSidebar.tags']()}
       actions={
-        <IconButton
-          data-testid="explorer-bar-add-favorite-button"
-          onClick={handleCreateNewFavoriteDoc}
-          size="16"
-          tooltip={t[
-            'com.affine.rootAppSidebar.explorer.tag-section-add-tooltip'
-          ]()}
-        >
-          <AddTagIcon />
-        </IconButton>
+        <div className={styles.iconContainer}>
+          <IconButton
+            data-testid="explorer-bar-add-tag-button"
+            onClick={handleOpenCreateModal}
+            size="16"
+            tooltip={t[
+              'com.affine.rootAppSidebar.explorer.tag-section-add-tooltip'
+            ]()}
+          >
+            <AddTagIcon />
+          </IconButton>
+          {creating && (
+            <CreateTagModal
+              setRenaming={setCreating}
+              handleRename={handleCreateNewTag}
+              rawName={t['com.affine.rootAppSidebar.tags.new-tag']()}
+              className={styles.createModalAnchor}
+            />
+          )}
+        </div>
       }
     >
       <ExplorerTreeRoot placeholder={<RootEmpty />}>
@@ -68,7 +81,6 @@ export const ExplorerTags = () => {
             location={{
               at: 'explorer:tags:list',
             }}
-            defaultRenaming={createdTag?.id === tag.id}
           />
         ))}
       </ExplorerTreeRoot>
diff --git a/packages/frontend/core/src/modules/explorer/views/sections/tags/styles.css.ts b/packages/frontend/core/src/modules/explorer/views/sections/tags/styles.css.ts
index 0fe8f49f21..74580897c2 100644
--- a/packages/frontend/core/src/modules/explorer/views/sections/tags/styles.css.ts
+++ b/packages/frontend/core/src/modules/explorer/views/sections/tags/styles.css.ts
@@ -9,3 +9,15 @@ export const draggedOverHighlight = style({
     },
   },
 });
+
+export const iconContainer = style({
+  display: 'flex',
+  position: 'relative',
+});
+
+export const createModalAnchor = style({
+  top: 20,
+  left: 'auto',
+  right: 0,
+  transform: 'translateX(6px)',
+});
diff --git a/packages/frontend/core/src/modules/explorer/views/tree/node.tsx b/packages/frontend/core/src/modules/explorer/views/tree/node.tsx
index edb1f33dcf..b8c838883a 100644
--- a/packages/frontend/core/src/modules/explorer/views/tree/node.tsx
+++ b/packages/frontend/core/src/modules/explorer/views/tree/node.tsx
@@ -98,14 +98,16 @@ interface WebExplorerTreeNodeProps extends BaseExplorerTreeNodeProps {
  * specific rename modal for explorer tree node,
  * Separate it into a separate component to prevent re-rendering the entire component when width changes.
  */
-const ExplorerTreeNodeRenameModal = ({
+export const ExplorerTreeNodeRenameModal = ({
   setRenaming,
   handleRename,
   rawName,
+  className,
 }: {
   setRenaming: (renaming: boolean) => void;
   handleRename: (newName: string) => void;
   rawName: string | undefined;
+  className?: string;
 }) => {
   const appSidebarService = useService(AppSidebarService).sidebar;
   const sidebarWidth = useLiveData(appSidebarService.width$);
@@ -117,7 +119,7 @@ const ExplorerTreeNodeRenameModal = ({
       onRename={handleRename}
       currentName={rawName ?? ''}
     >
-      <div className={styles.itemRenameAnchor} />
+      <div className={clsx(styles.itemRenameAnchor, className)} />
     </RenameModal>
   );
 };