Federated Learning (FL) is a distributed machine learning paradigm that enables learning models from decentralized private datasets where the labeling effort is entrusted to the clients. While most existing FL approaches assume high-quality labels are readily available on users’ devices, in reality, label noise can naturally occur in FL and is closely related to clients’ characteristics. Due to scarcity of available data and significant label noise variations among clients in FL, existing state-of-the-art centralized approaches exhibit unsatisfactory performance, whereas prior FL studies rely on excessive on-device computational schemes or additional clean data available on the server. We propose FedLN , a framework to deal with label noise across different FL training stages, namely FL initialization, on-device model training, and server model aggregation, able to accommodate the diverse computational capabilities of devices in an FL system. Specifically, FedLN computes per-client noise level estimation in a single federated round and improves the models’ performance by either correcting or mitigating the effect of noisy samples. Our evaluation on various publicly available vision and audio datasets demonstrates a 22% improvement on average compared to other existing methods for a label noise level of 60%. We further validate the efficiency of FedLN in human-annotated real-world noisy datasets and report a 4.8% increase on average in models’ recognition performance, highlighting that FedLN can be useful for improving FL services provided to everyday users.