diff --git a/homeassistant/components/todoist/calendar.py b/homeassistant/components/todoist/calendar.py
index 0a822d0515d..8fdafee6cfd 100644
--- a/homeassistant/components/todoist/calendar.py
+++ b/homeassistant/components/todoist/calendar.py
@@ -94,7 +94,7 @@ PLATFORM_SCHEMA = PLATFORM_SCHEMA.extend(
                             ),
                             vol.Optional(
                                 CONF_PROJECT_LABEL_WHITELIST, default=[]
-                            ): vol.All(cv.ensure_list, [vol.All(cv.string, vol.Lower)]),
+                            ): vol.All(cv.ensure_list, [vol.All(cv.string)]),
                         }
                     )
                 ]
@@ -458,9 +458,8 @@ class TodoistProjectData:
 
         # All task Labels (optional parameter).
         task[LABELS] = [
-            label.name.lower() for label in self._labels if label.id in data.labels
+            label.name for label in self._labels if label.name in data.labels
         ]
-
         if self._label_whitelist and (
             not any(label in task[LABELS] for label in self._label_whitelist)
         ):
diff --git a/tests/components/todoist/test_calendar.py b/tests/components/todoist/test_calendar.py
index 4b55ac6859f..fece314c91c 100644
--- a/tests/components/todoist/test_calendar.py
+++ b/tests/components/todoist/test_calendar.py
@@ -1,4 +1,5 @@
 """Unit tests for the Todoist calendar platform."""
+from datetime import datetime
 from unittest.mock import AsyncMock, patch
 
 import pytest
@@ -9,6 +10,7 @@ from homeassistant.components.todoist.calendar import DOMAIN
 from homeassistant.const import CONF_TOKEN
 from homeassistant.core import HomeAssistant
 from homeassistant.helpers import entity_registry
+from homeassistant.helpers.entity_component import async_update_entity
 
 
 @pytest.fixture(name="task")
@@ -23,9 +25,11 @@ def mock_task() -> Task:
         created_at="2021-10-01T00:00:00",
         creator_id="1",
         description="A task",
-        due=Due(is_recurring=False, date="2022-01-01", string="today"),
+        due=Due(
+            is_recurring=False, date=datetime.now().strftime("%Y-%m-%d"), string="today"
+        ),
         id="1",
-        labels=[],
+        labels=["Label1"],
         order=1,
         parent_id=None,
         priority=1,
@@ -37,7 +41,7 @@ def mock_task() -> Task:
 
 
 @pytest.fixture(name="api")
-def mock_api() -> AsyncMock:
+def mock_api(task) -> AsyncMock:
     """Mock the api state."""
     api = AsyncMock()
     api.get_projects.return_value = [
@@ -57,9 +61,10 @@ def mock_api() -> AsyncMock:
         )
     ]
     api.get_labels.return_value = [
-        Label(id="1", name="label1", color="1", order=1, is_favorite=False)
+        Label(id="1", name="Label1", color="1", order=1, is_favorite=False)
     ]
     api.get_collaborators.return_value = []
+    api.get_tasks.return_value = [task]
     return api
 
 
@@ -84,6 +89,29 @@ async def test_calendar_entity_unique_id(todoist_api, hass: HomeAssistant, api)
     assert entity.unique_id == "12345"
 
 
+@patch("homeassistant.components.todoist.calendar.TodoistAPIAsync")
+async def test_update_entity_for_custom_project_with_labels_on(todoist_api, hass, api):
+    """Test that the calendar's state is on for a custom project using labels."""
+    todoist_api.return_value = api
+    assert await setup.async_setup_component(
+        hass,
+        "calendar",
+        {
+            "calendar": {
+                "platform": DOMAIN,
+                CONF_TOKEN: "token",
+                "custom_projects": [{"name": "All projects", "labels": ["Label1"]}],
+            }
+        },
+    )
+    await hass.async_block_till_done()
+
+    await async_update_entity(hass, "calendar.all_projects")
+    state = hass.states.get("calendar.all_projects")
+    assert state.attributes["labels"] == ["Label1"]
+    assert state.state == "on"
+
+
 @patch("homeassistant.components.todoist.calendar.TodoistAPIAsync")
 async def test_calendar_custom_project_unique_id(
     todoist_api, hass: HomeAssistant, api