diff --git a/pkg/webhook/propagationpolicy/mutating_test.go b/pkg/webhook/propagationpolicy/mutating_test.go
new file mode 100644
index 000000000000..2621aca0c65f
--- /dev/null
+++ b/pkg/webhook/propagationpolicy/mutating_test.go
@@ -0,0 +1,220 @@
+/*
+Copyright 2024 The Karmada Authors.
+
+Licensed under the Apache License, Version 2.0 (the "License");
+you may not use this file except in compliance with the License.
+You may obtain a copy of the License at
+
+    http://www.apache.org/licenses/LICENSE-2.0
+
+Unless required by applicable law or agreed to in writing, software
+distributed under the License is distributed on an "AS IS" BASIS,
+WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+See the License for the specific language governing permissions and
+limitations under the License.
+*/
+
+package propagationpolicy
+
+import (
+	"context"
+	"encoding/json"
+	"errors"
+	"net/http"
+	"reflect"
+	"testing"
+
+	admissionv1 "k8s.io/api/admission/v1"
+	corev1 "k8s.io/api/core/v1"
+	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
+	"k8s.io/apimachinery/pkg/runtime"
+	"k8s.io/utils/ptr"
+	"sigs.k8s.io/controller-runtime/pkg/webhook/admission"
+	mcsv1alpha1 "sigs.k8s.io/mcs-api/pkg/apis/v1alpha1"
+
+	policyv1alpha1 "github.com/karmada-io/karmada/pkg/apis/policy/v1alpha1"
+	"github.com/karmada-io/karmada/pkg/util"
+	"github.com/karmada-io/karmada/pkg/util/helper"
+)
+
+type fakeMutationDecoder struct {
+	err error
+	obj runtime.Object
+}
+
+// Decode mocks the Decode method of admission.Decoder.
+func (f *fakeMutationDecoder) Decode(_ admission.Request, obj runtime.Object) error {
+	if f.err != nil {
+		return f.err
+	}
+	if f.obj != nil {
+		reflect.ValueOf(obj).Elem().Set(reflect.ValueOf(f.obj).Elem())
+	}
+	return nil
+}
+
+// DecodeRaw mocks the DecodeRaw method of admission.Decoder.
+func (f *fakeMutationDecoder) DecodeRaw(_ runtime.RawExtension, obj runtime.Object) error {
+	if f.err != nil {
+		return f.err
+	}
+	if f.obj != nil {
+		reflect.ValueOf(obj).Elem().Set(reflect.ValueOf(f.obj).Elem())
+	}
+	return nil
+}
+
+func TestMutatingAdmission_Handle(t *testing.T) {
+	tests := []struct {
+		name    string
+		decoder admission.Decoder
+		req     admission.Request
+		want    admission.Response
+	}{
+		{
+			name: "Handle_DecodeError_DeniesAdmission",
+			decoder: &fakeValidationDecoder{
+				err: errors.New("decode error"),
+			},
+			req:  admission.Request{},
+			want: admission.Errored(http.StatusBadRequest, errors.New("decode error")),
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			v := NewMutatingHandler(300, 300, tt.decoder)
+			got := v.Handle(context.Background(), tt.req)
+			if !reflect.DeepEqual(got, tt.want) {
+				t.Errorf("Handle() = %v, want %v", got, tt.want)
+			}
+		})
+	}
+}
+
+func TestMutatingAdmission_Handle_FullCoverage(t *testing.T) {
+	// Define the policy name and namespace to be used in the test.
+	policyName := "test-policy"
+	namespace := "test-namespace"
+
+	// Define default toleration seconds for the test.
+	var notReadyTolerationSeconds int64 = 300
+	var unreachableTolerationSeconds int64 = 300
+
+	// Mock a request with a specific namespace.
+	req := admission.Request{
+		AdmissionRequest: admissionv1.AdmissionRequest{
+			Namespace: namespace,
+			Operation: admissionv1.Create,
+		},
+	}
+
+	// Create the initial policy with default values for testing.
+	policy := &policyv1alpha1.PropagationPolicy{
+		ObjectMeta: metav1.ObjectMeta{
+			Name: policyName,
+		},
+		Spec: policyv1alpha1.PropagationSpec{
+			Placement: policyv1alpha1.Placement{
+				SpreadConstraints: []policyv1alpha1.SpreadConstraint{
+					{SpreadByLabel: "", SpreadByField: "", MinGroups: 0},
+				},
+				ReplicaScheduling: &policyv1alpha1.ReplicaSchedulingStrategy{
+					ReplicaSchedulingType: policyv1alpha1.ReplicaSchedulingTypeDivided,
+				},
+			},
+			PropagateDeps: false,
+			ResourceSelectors: []policyv1alpha1.ResourceSelector{
+				{
+					Namespace:  "",
+					Kind:       util.ServiceImportKind,
+					APIVersion: mcsv1alpha1.GroupVersion.String(),
+				},
+				{Namespace: ""},
+			},
+			Failover: &policyv1alpha1.FailoverBehavior{
+				Application: &policyv1alpha1.ApplicationFailoverBehavior{
+					PurgeMode:          policyv1alpha1.Graciously,
+					GracePeriodSeconds: nil,
+				},
+			},
+		},
+	}
+
+	// Define the expected policy after mutations.
+	wantPolicy := &policyv1alpha1.PropagationPolicy{
+		ObjectMeta: metav1.ObjectMeta{
+			Name: policyName,
+			Labels: map[string]string{
+				policyv1alpha1.PropagationPolicyPermanentIDLabel: "some-unique-uuid",
+			},
+			Finalizers: []string{util.PropagationPolicyControllerFinalizer},
+		},
+		Spec: policyv1alpha1.PropagationSpec{
+			Placement: policyv1alpha1.Placement{
+				SpreadConstraints: []policyv1alpha1.SpreadConstraint{
+					{
+						SpreadByField: policyv1alpha1.SpreadByFieldCluster,
+						MinGroups:     1,
+					},
+				},
+				ReplicaScheduling: &policyv1alpha1.ReplicaSchedulingStrategy{
+					ReplicaSchedulingType:     policyv1alpha1.ReplicaSchedulingTypeDivided,
+					ReplicaDivisionPreference: policyv1alpha1.ReplicaDivisionPreferenceWeighted,
+				},
+				ClusterTolerations: []corev1.Toleration{
+					*helper.NewNotReadyToleration(notReadyTolerationSeconds),
+					*helper.NewUnreachableToleration(unreachableTolerationSeconds),
+				},
+			},
+			PropagateDeps: true,
+			ResourceSelectors: []policyv1alpha1.ResourceSelector{
+				{
+					Namespace:  namespace,
+					Kind:       util.ServiceImportKind,
+					APIVersion: mcsv1alpha1.GroupVersion.String(),
+				},
+				{Namespace: namespace},
+			},
+			Failover: &policyv1alpha1.FailoverBehavior{
+				Application: &policyv1alpha1.ApplicationFailoverBehavior{
+					PurgeMode:          policyv1alpha1.Graciously,
+					GracePeriodSeconds: ptr.To[int32](600),
+				},
+			},
+		},
+	}
+
+	// Mock decoder that decodes the request into the policy object.
+	decoder := &fakeMutationDecoder{
+		obj: policy,
+	}
+
+	// Marshal the expected policy to simulate the final mutated object.
+	wantBytes, err := json.Marshal(wantPolicy)
+	if err != nil {
+		t.Fatalf("Failed to marshal expected policy: %v", err)
+	}
+	req.Object.Raw = wantBytes
+
+	// Instantiate the mutating handler.
+	mutatingHandler := NewMutatingHandler(
+		notReadyTolerationSeconds, unreachableTolerationSeconds, decoder,
+	)
+
+	// Call the Handle function.
+	got := mutatingHandler.Handle(context.Background(), req)
+
+	// Verify that the only patch applied is for the UUID label. If any other patches are present, it indicates that the policy was not handled as expected.
+	if len(got.Patches) > 0 {
+		firstPatch := got.Patches[0]
+		if firstPatch.Operation != "replace" || firstPatch.Path != "/metadata/labels/propagationpolicy.karmada.io~1permanent-id" {
+			t.Errorf("Handle() returned unexpected patches. Only the UUID patch was expected. Received patches: %v", got.Patches)
+		}
+	}
+
+	// Check if the admission request was allowed.
+	if !got.Allowed {
+		t.Errorf("Handle() got.Allowed = false, want true")
+	}
+}