The storage requirements for component labeling and feature extraction operations are unknown a priori. Whenever large images are processed, many labels, and thus a large amount of storage, may be required, making hardware implementation difficult. The proposed labeling procedure eliminates memory overflow by enabling the reuse of memory locations in which features of nonactive labels had been stored. The storage requirement for the worst case conditions is analyzed and is shown to be realizable. The basic procedure can be implemented in two modes, an interrupted mode or a parallel mode. A hardware design is presented.