diff --git a/CHANGELOG.md b/CHANGELOG.md
index f9bcc208412f..7ed4fb36b27e 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -36,6 +36,7 @@
 * [10727](https://github.com/grafana/loki/pull/10727) **sandeepsukhani** Native otlp ingestion support
 * [11051](https://github.com/grafana/loki/pull/11051) Refactor to not use global logger in modules
 ##### Fixes
+* [11074](https://github.com/grafana/loki/pull/11074) **hainenber** Fix panic in lambda-promtail due to mishandling of empty DROP_LABELS env var.
 
 ##### Changes
 
diff --git a/tools/lambda-promtail/lambda-promtail/main.go b/tools/lambda-promtail/lambda-promtail/main.go
index 14cef6732737..0e0df1e88004 100644
--- a/tools/lambda-promtail/lambda-promtail/main.go
+++ b/tools/lambda-promtail/lambda-promtail/main.go
@@ -137,14 +137,15 @@ func parseExtraLabels(extraLabelsRaw string, omitPrefix bool) (model.LabelSet, e
 func getDropLabels() ([]model.LabelName, error) {
 	var result []model.LabelName
 
-	dropLabelsRaw = os.Getenv("DROP_LABELS")
-	dropLabelsRawSplit := strings.Split(dropLabelsRaw, ",")
-	for _, dropLabelRaw := range dropLabelsRawSplit {
-		dropLabel := model.LabelName(dropLabelRaw)
-		if !dropLabel.IsValid() {
-			return []model.LabelName{}, fmt.Errorf("invalid label name %s", dropLabelRaw)
+	if dropLabelsRaw = os.Getenv("DROP_LABELS"); dropLabelsRaw != "" {
+		dropLabelsRawSplit := strings.Split(dropLabelsRaw, ",")
+		for _, dropLabelRaw := range dropLabelsRawSplit {
+			dropLabel := model.LabelName(dropLabelRaw)
+			if !dropLabel.IsValid() {
+				return []model.LabelName{}, fmt.Errorf("invalid label name %s", dropLabelRaw)
+			}
+			result = append(result, dropLabel)
 		}
-		result = append(result, dropLabel)
 	}
 
 	return result, nil
diff --git a/tools/lambda-promtail/lambda-promtail/main_test.go b/tools/lambda-promtail/lambda-promtail/main_test.go
index 21063b643c10..5f70044e2b5e 100644
--- a/tools/lambda-promtail/lambda-promtail/main_test.go
+++ b/tools/lambda-promtail/lambda-promtail/main_test.go
@@ -37,7 +37,8 @@ func TestLambdaPromtail_TestParseLabelsNoneProvided(t *testing.T) {
 }
 
 func TestLambdaPromtail_TestDropLabels(t *testing.T) {
-	os.Setenv("DROP_LABELS", "A1,A2")
+	// Simulate default env var set in Terraform
+	os.Setenv("DROP_LABELS", "")
 
 	// Reset the shared global variables
 	defer func() {
@@ -48,6 +49,10 @@ func TestLambdaPromtail_TestDropLabels(t *testing.T) {
 	var err error
 	dropLabels, err = getDropLabels()
 	require.Nil(t, err)
+
+	os.Setenv("DROP_LABELS", "A1,A2")
+	dropLabels, err = getDropLabels()
+	require.Nil(t, err)
 	require.Contains(t, dropLabels, model.LabelName("A1"))
 
 	defaultLabelSet := model.LabelSet{