Labis started as a small village known as Kampung Paya Merah. The village got its name from a type of river grass which became the favorite food for River Terrapins . In early 20th century, British officers came to the villages to survey for new areas to be developed in Segamat district.
The British officers were surprised to see the river terrapins since they had not seen those animals before. They asked the villagers the name of those animals and the villagers answered, ''"Labi-labi, tuan,"'' ("River terrapins, sir"). Because they didn't know the name of those animals, the British officers referred to them as ''labis'' in the plural form. Therefore, the British officers decided to name the settlement Labis.
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