diff --git a/src/taxonomy/data/api.ts b/src/taxonomy/data/api.ts
index eb50241106..3a4545502e 100644
--- a/src/taxonomy/data/api.ts
+++ b/src/taxonomy/data/api.ts
@@ -91,6 +91,7 @@ export const apiUrls = {
   /** URL to plan (preview what would happen) a taxonomy import */
   tagsPlanImport: (taxonomyId: number) => makeUrl(`${taxonomyId}/tags/import/plan/`),
   createTag: (taxonomyId: number) => makeUrl(`${taxonomyId}/tags/`),
+  updateTag: (taxonomyId: number) => makeUrl(`${taxonomyId}/tags/`),
 } satisfies Record<string, (...args: any[]) => string>;
 
 /**
diff --git a/src/taxonomy/data/apiHooks.ts b/src/taxonomy/data/apiHooks.ts
index 3207f5665a..479cc2c4db 100644
--- a/src/taxonomy/data/apiHooks.ts
+++ b/src/taxonomy/data/apiHooks.ts
@@ -240,3 +240,27 @@ export const useCreateTag = (taxonomyId: number) => {
     },
   });
 };
+
+export const useUpdateTag = (taxonomyId: number) => {
+  const queryClient = useQueryClient();
+
+  return useMutation({
+    mutationFn: async ({ value, originalValue }: { value: string, originalValue: string }) => {
+      try {
+        await getAuthenticatedHttpClient().patch(
+          apiUrls.updateTag(taxonomyId),
+          { tag: originalValue, updated_tag_value: value },
+        );
+      } catch (err) {
+        throw new Error(getApiErrorMessage(err));
+      }
+    },
+    onSuccess: () => {
+      queryClient.invalidateQueries({
+        queryKey: taxonomyQueryKeys.taxonomyTagList(taxonomyId),
+      });
+      // In the metadata, 'tagsCount' (and possibly other fields) will have changed:
+      queryClient.invalidateQueries({ queryKey: taxonomyQueryKeys.taxonomyMetadata(taxonomyId) });
+    },
+  });
+};
diff --git a/src/taxonomy/data/types.ts b/src/taxonomy/data/types.ts
index d8ca63d1e7..4fd3c41167 100644
--- a/src/taxonomy/data/types.ts
+++ b/src/taxonomy/data/types.ts
@@ -59,6 +59,7 @@ export interface TagListData {
   next: string;
   numPages: number;
   previous: string;
+  canAddTag?: boolean;
   results: TagData[];
   start: number;
 }
diff --git a/src/taxonomy/tag-list/TagListTable.test.jsx b/src/taxonomy/tag-list/TagListTable.test.jsx
index 6074dc1e23..4fbf2a1b63 100644
--- a/src/taxonomy/tag-list/TagListTable.test.jsx
+++ b/src/taxonomy/tag-list/TagListTable.test.jsx
@@ -1,25 +1,14 @@
 import React from 'react';
-import PropTypes from 'prop-types';
-import { IntlProvider } from '@edx/frontend-platform/i18n';
-import { getAuthenticatedHttpClient } from '@edx/frontend-platform/auth';
-import { initializeMockApp } from '@edx/frontend-platform';
-import { AppProvider } from '@edx/frontend-platform/react';
 import {
   render, waitFor, waitForElementToBeRemoved, screen, within,
-  fireEvent, act, cleanup,
-} from '@testing-library/react';
-import { QueryClient, QueryClientProvider } from '@tanstack/react-query';
-import MockAdapter from 'axios-mock-adapter';
-
-import initializeStore from '../../store';
+  fireEvent, act, cleanup, initializeMocks,
+} from '@src/testUtils';
 import * as apiHooksModule from '../data/apiHooks';
 import * as hooksModule from './hooks';
 import * as treeTableModule from '../tree-table';
 import TagListTable from './TagListTable';
 
-let store;
 let axiosMock;
-const queryClient = new QueryClient();
 const adminUser = {
   userId: 3,
   username: 'abc123',
@@ -31,20 +20,6 @@ const nonAdminUser = {
   administrator: false,
 };
 
-const RootWrapper = ({ maxDepth = 3 }) => (
-  <AppProvider store={store}>
-    <IntlProvider locale="en" messages={{}}>
-      <QueryClientProvider client={queryClient}>
-        <TagListTable taxonomyId={1} maxDepth={maxDepth} />
-      </QueryClientProvider>
-    </IntlProvider>
-  </AppProvider>
-);
-
-RootWrapper.propTypes = {
-  maxDepth: PropTypes.number,
-};
-
 const tagDefaults = { depth: 0, external_id: '', parent_value: null };
 const mockTagsResponse = {
   next: null,
@@ -103,6 +78,15 @@ const mockTagsResponse = {
     },
   ],
 };
+
+const mockTagResponseDisallowingEdits = {
+  ...mockTagsResponse,
+  results: mockTagsResponse.results.map(tag => ({
+    ...tag,
+    can_change_tag: false,
+    can_delete_tag: false,
+  })),
+};
 const mockTagsPaginationResponse = {
   next: null,
   previous: null,
@@ -134,7 +118,7 @@ const subTagsResponse = {
 const subTagsUrl = 'http://localhost:18010/api/content_tagging/v1/taxonomies/1/tags/?full_depth_threshold=10000&parent_tag=root+tag+1';
 const createTagUrl = 'http://localhost:18010/api/content_tagging/v1/taxonomies/1/tags/';
 
-const renderTagListTable = (maxDepth = 3) => render(<RootWrapper maxDepth={maxDepth} />);
+const renderTagListTable = (maxDepth = 3) => render(<TagListTable taxonomyId={1} maxDepth={maxDepth} />);
 
 const flushReactUpdates = async () => {
   await act(async () => {
@@ -156,9 +140,7 @@ const expectNoDraftRows = () => {
 
 const openTopLevelDraftRow = async () => {
   const addButton = await screen.findByLabelText('Create Tag');
-  await act(async () => {
-    fireEvent.click(addButton);
-  });
+  fireEvent.click(addButton);
   const creatingRow = await screen.findByTestId('creating-top-row');
   const input = creatingRow.querySelector('input');
   expect(input).toBeInTheDocument();
@@ -166,11 +148,16 @@ const openTopLevelDraftRow = async () => {
 };
 
 const openActionsMenuForTag = (tagName, actionButtonName = /actions/i) => {
+  if (!screen.queryAllByText(tagName)?.length) {
+    // expand all
+    const expandButton = screen.queryByRole('button', { name: 'Expand All' });
+    if (expandButton) {
+      fireEvent.click(expandButton);
+    }
+  }
   const row = screen.getByText(tagName).closest('tr');
   const actionsButton = within(row).getByRole('button', { name: actionButtonName });
-  act(() => {
-    fireEvent.click(actionsButton);
-  });
+  fireEvent.click(actionsButton);
   return row;
 };
 
@@ -188,16 +175,25 @@ const openSubtagDraftRow = async ({
   return { rows, draftRow, input };
 };
 
+const openRenameDraftRow = async (tagName = 'root tag 1') => {
+  openActionsMenuForTag(tagName);
+  fireEvent.click(screen.getByRole('button', { name: /Rename/i }));
+  const input = screen.getByRole('textbox', { name: /type tag name/i });
+  const row = input.closest('tr');
+  expect(row).toBeInTheDocument();
+  const saveButton = within(row).getByText('Save');
+  const cancelButton = within(row).getByText('Cancel');
+  return {
+    row,
+    input,
+    saveButton,
+    cancelButton,
+  };
+};
+
 describe('<TagListTable />', () => {
-  beforeAll(async () => {
-    initializeMockApp({
-      authenticatedUser: adminUser,
-    });
-    axiosMock = new MockAdapter(getAuthenticatedHttpClient());
-  });
   beforeEach(async () => {
-    store = initializeStore();
-    axiosMock.reset();
+    ({ axiosMock } = initializeMocks({ user: adminUser }));
     axiosMock.onGet(rootTagsListUrl).reply(200, mockTagsResponse);
     axiosMock.onGet(subTagsUrl).reply(200, subTagsResponse);
     renderTagListTable();
@@ -297,7 +293,31 @@ describe('<TagListTable />', () => {
   });
 
   describe('Create a new top-level tag', () => {
+    it('should disable tag creation buttons if the taxonomy includes `can_add_tag: false`', async () => {
+      axiosMock.onGet(rootTagsListUrl).reply(200, {
+        ...mockTagsResponse,
+        can_add_tag: false,
+      });
+      cleanup();
+      ({ axiosMock } = initializeMocks({ user: adminUser }));
+      axiosMock.onGet(rootTagsListUrl).reply(200, {
+        ...mockTagsResponse,
+        can_add_tag: false,
+      });
+      axiosMock.onGet(subTagsUrl).reply(200, subTagsResponse);
+      renderTagListTable();
+      await waitForRootTag();
+
+      openActionsMenuForTag('root tag 1');
+      expect(screen.getByRole('button', { name: 'Add Subtag' })).toHaveAttribute('aria-disabled', 'true');
+      expect(screen.getByLabelText('Create Tag')).toBeDisabled();
+    });
+
     describe('with editable user and loaded taxonomy', () => {
+      beforeEach(() => {
+        axiosMock.onGet(rootTagsListUrl).reply(200, mockTagsResponse);
+      });
+
       it('should add draft row when top-level "Add tag" button is clicked', async () => {
         const { creatingRow } = await openTopLevelDraftRow();
 
@@ -316,7 +336,7 @@ describe('<TagListTable />', () => {
         const { creatingRow, input } = await openTopLevelDraftRow();
 
         fireEvent.change(input, { target: { value: 'a new tag' } });
-        const saveButton = within(creatingRow).getByText('Save');
+        const saveButton = within(creatingRow).getByRole('button', { name: 'Save' });
         fireEvent.click(saveButton);
         await waitFor(() => {
           expect(axiosMock.history.post.length).toBe(1);
@@ -365,7 +385,7 @@ describe('<TagListTable />', () => {
         const { creatingRow, input } = await openTopLevelDraftRow();
 
         fireEvent.change(input, { target: { value: 'a new tag' } });
-        const saveButton = within(creatingRow).getByText('Save');
+        const saveButton = within(creatingRow).getByRole('button', { name: 'Save' });
         fireEvent.click(saveButton);
         const spinner = await screen.findByRole('status');
         expect(spinner.textContent).toEqual('Saving...');
@@ -382,7 +402,7 @@ describe('<TagListTable />', () => {
         const { creatingRow, input } = await openTopLevelDraftRow();
 
         fireEvent.change(input, { target: { value: 'a new tag' } });
-        const saveButton = within(creatingRow).getByText('Save');
+        const saveButton = within(creatingRow).getByRole('button', { name: 'Save' });
         fireEvent.click(saveButton);
         let newTag;
         await waitFor(() => {
@@ -409,7 +429,7 @@ describe('<TagListTable />', () => {
         const { creatingRow, input } = await openTopLevelDraftRow();
 
         fireEvent.change(input, { target: { value: 'a new tag' } });
-        const saveButton = within(creatingRow).getByText('Save');
+        const saveButton = within(creatingRow).getByRole('button', { name: 'Save' });
         fireEvent.click(saveButton);
         const toast = await screen.findByText('Tag "a new tag" created successfully');
         expect(toast).toBeInTheDocument();
@@ -426,7 +446,7 @@ describe('<TagListTable />', () => {
         const { creatingRow, input } = await openTopLevelDraftRow();
 
         fireEvent.change(input, { target: { value: 'xyz tag' } });
-        const saveButton = within(creatingRow).getByText('Save');
+        const saveButton = within(creatingRow).getByRole('button', { name: 'Save' });
         fireEvent.click(saveButton);
         // no input row should be in the document
         await waitFor(() => {
@@ -448,7 +468,7 @@ describe('<TagListTable />', () => {
         const { creatingRow, input } = await openTopLevelDraftRow();
 
         fireEvent.change(input, { target: { value: 'xyz tag' } });
-        const saveButton = within(creatingRow).getByText('Save');
+        const saveButton = within(creatingRow).getByRole('button', { name: 'Save' });
         fireEvent.click(saveButton);
         const temporaryRow = await screen.findByText('xyz tag');
         // temporaryRow should be at the top of the table, that is, the first row after the header
@@ -471,6 +491,8 @@ describe('<TagListTable />', () => {
 
       // a bit flaky when ran together with other tests - any way to improve this?
       it('should allow adding multiple tags consecutively without a page refresh', async () => {
+        // clear axios mock history
+        axiosMock.reset();
         axiosMock.onPost(createTagUrl).reply(config => {
           const requestData = JSON.parse(config.data);
           return [201, {
@@ -488,7 +510,7 @@ describe('<TagListTable />', () => {
         expect(input).toBeInTheDocument();
 
         fireEvent.change(input, { target: { value: 'Tag A' } });
-        let saveButton = within(creatingRow).getByText('Save');
+        let saveButton = within(creatingRow).getByRole('button', { name: 'Save' });
         fireEvent.click(saveButton);
         const tagA = await screen.findByText('Tag A');
         expect(tagA).toBeInTheDocument();
@@ -500,7 +522,7 @@ describe('<TagListTable />', () => {
         expect(input).toBeInTheDocument();
 
         fireEvent.change(input, { target: { value: 'Tag B' } });
-        saveButton = within(creatingRow).getByText('Save');
+        saveButton = within(creatingRow).getByRole('button', { name: 'Save' });
         fireEvent.click(saveButton);
         const tagB = await screen.findByText('Tag B');
         expect(tagB).toBeInTheDocument();
@@ -512,7 +534,7 @@ describe('<TagListTable />', () => {
         expect(tagBRowIndex).toBeLessThan(tagARowIndex);
 
         // no additional get requests should have been made, that is, the table should not have been refreshed
-        expect(axiosMock.history.get.length).toBe(1);
+        expect(axiosMock.history.get.length).toBe(0);
       });
 
       it('should disable the Save button when the input is empty', async () => {
@@ -521,7 +543,7 @@ describe('<TagListTable />', () => {
         const draftRow = await screen.findAllByRole('row');
         const input = draftRow[1].querySelector('input');
         expect(input).toBeInTheDocument();
-        const saveButton = within(draftRow[1]).getByText('Save');
+        const saveButton = within(draftRow[1]).getByRole('button', { name: 'Save' });
         expect(saveButton).toBeDisabled();
         fireEvent.change(input, { target: { value: 'a new tag' } });
         expect(saveButton).not.toBeDisabled();
@@ -533,7 +555,7 @@ describe('<TagListTable />', () => {
         const draftRow = await screen.findAllByRole('row');
         const input = draftRow[1].querySelector('input');
         expect(input).toBeInTheDocument();
-        const saveButton = within(draftRow[1]).getByText('Save');
+        const saveButton = within(draftRow[1]).getByRole('button', { name: 'Save' });
         expect(saveButton).toBeDisabled();
         fireEvent.change(input, { target: { value: '   ' } });
         expect(saveButton).toBeDisabled();
@@ -553,7 +575,7 @@ describe('<TagListTable />', () => {
         fireEvent.click(await screen.findByLabelText('Create Tag'));
         const draftRow = await screen.findAllByRole('row');
         const input = draftRow[1].querySelector('input');
-        const saveButton = within(draftRow[1]).getByText('Save');
+        const saveButton = within(draftRow[1]).getByRole('button', { name: 'Save' });
 
         fireEvent.change(input, { target: { value: ' Tag A ' } });
         fireEvent.click(saveButton);
@@ -568,11 +590,9 @@ describe('<TagListTable />', () => {
         fireEvent.click(await screen.findByLabelText('Create Tag'));
         const draftRow = await screen.findAllByRole('row');
         const input = draftRow[1].querySelector('input');
-        const saveButton = within(draftRow[1]).getByText('Save');
+        const saveButton = within(draftRow[1]).getByRole('button', { name: 'Save' });
 
-        await act(async () => {
-          fireEvent.change(input, { target: { value: 'invalid;tag' } });
-        });
+        fireEvent.change(input, { target: { value: 'invalid;tag' } });
 
         expect(saveButton).toBeDisabled();
         expect(screen.getByText(/invalid character/i)).toBeInTheDocument();
@@ -584,7 +604,7 @@ describe('<TagListTable />', () => {
         fireEvent.click(await screen.findByLabelText('Create Tag'));
         const draftRow = await screen.findAllByRole('row');
         const input = draftRow[1].querySelector('input');
-        const saveButton = within(draftRow[1]).getByText('Save');
+        const saveButton = within(draftRow[1]).getByRole('button', { name: 'Save' });
 
         fireEvent.change(input, { target: { value: 'root tag 1' } });
         fireEvent.click(saveButton);
@@ -600,7 +620,7 @@ describe('<TagListTable />', () => {
         fireEvent.click(await screen.findByLabelText('Create Tag'));
         const draftRow = await screen.findAllByRole('row');
         const input = draftRow[1].querySelector('input');
-        const saveButton = within(draftRow[1]).getByText('Save');
+        const saveButton = within(draftRow[1]).getByRole('button', { name: 'Save' });
 
         fireEvent.change(input, { target: { value: 'will fail' } });
         fireEvent.click(saveButton);
@@ -630,7 +650,7 @@ describe('<TagListTable />', () => {
     });
 
     it('should hide Add Tag for users without taxonomy edit permissions', async () => {
-      initializeMockApp({ authenticatedUser: nonAdminUser });
+      initializeMocks({ user: nonAdminUser });
       axiosMock.onGet(rootTagsListUrl).reply(200, mockTagsResponse);
 
       expect(screen.queryByText('Add Tag')).not.toBeInTheDocument();
@@ -638,120 +658,285 @@ describe('<TagListTable />', () => {
   });
 
   describe('Create a new subtag', () => {
-    describe('with editable user and loaded taxonomy', () => {
-      it('should show an Add sub-tag option in the parent tag actions', async () => {
-        expect(screen.queryAllByText('Add Subtag').length).toBe(0);
-        // user clicks on row actions for root tag 1
-        openActionsMenuForTag('root tag 1');
-        expect(screen.getByText('Add Subtag')).toBeInTheDocument();
+    it('should show an Add sub-tag option in the parent tag actions', async () => {
+      expect(screen.queryAllByText('Add Subtag').length).toBe(0);
+      // user clicks on row actions for root tag 1
+      openActionsMenuForTag('root tag 1');
+      expect(screen.getByRole('button', { name: 'Add Subtag' })).toBeInTheDocument();
+    });
+
+    it('should render an inline add-subtag row with input, placeholder, and action buttons', async () => {
+      const { rows } = await openSubtagDraftRow({ tagName: 'root tag 1' });
+      const draftRows = rows.filter(tableRow => tableRow.querySelector('input'));
+      expect(draftRows[0].querySelector('input')).toBeInTheDocument();
+      // expect the draft row to be directly beneath the parent tag row
+      const parentRowIndex = rows.findIndex(tableRow => within(tableRow).queryByText('root tag 1'));
+      const draftRowIndex = rows.findIndex(tableRow => tableRow.querySelector('input'));
+      expect(draftRowIndex).toBe(parentRowIndex + 1);
+      expect(draftRows[0].querySelector('input')).toBeInTheDocument();
+      expect(within(draftRows[0]).getByRole('button', { name: 'Cancel' })).toBeInTheDocument();
+      expect(within(draftRows[0]).getByRole('button', { name: 'Save' })).toBeInTheDocument();
+    });
+
+    it('should remove add-subtag row and avoid create request when cancelled', async () => {
+      const { draftRow, input } = await openSubtagDraftRow({ tagName: 'root tag 1' });
+      fireEvent.change(input, { target: { value: 'new subtag' } });
+      fireEvent.click(within(draftRow).getByRole('button', { name: 'Cancel' }));
+
+      await waitFor(() => {
+        expect(axiosMock.history.post.length).toBe(0);
+        expectNoDraftRows();
       });
+    });
 
-      it('should render an inline add-subtag row with input, placeholder, and action buttons', async () => {
-        const { rows } = await openSubtagDraftRow({ tagName: 'root tag 1' });
-        const draftRows = rows.filter(tableRow => tableRow.querySelector('input'));
-        expect(draftRows[0].querySelector('input')).toBeInTheDocument();
-        // expect the draft row to be directly beneath the parent tag row
-        const parentRowIndex = rows.findIndex(tableRow => within(tableRow).queryByText('root tag 1'));
-        const draftRowIndex = rows.findIndex(tableRow => tableRow.querySelector('input'));
-        expect(draftRowIndex).toBe(parentRowIndex + 1);
-        expect(draftRows[0].querySelector('input')).toBeInTheDocument();
-        expect(within(draftRows[0]).getByText('Cancel')).toBeInTheDocument();
-        expect(within(draftRows[0]).getByText('Save')).toBeInTheDocument();
+    it('should remove add-subtag row and avoid create request on escape key', async () => {
+      const { input } = await openSubtagDraftRow({ tagName: 'root tag 1' });
+
+      fireEvent.change(input, { target: { value: 'new subtag' } });
+      fireEvent.keyDown(input, { key: 'Escape', code: 'Escape' });
+
+      await waitFor(() => {
+        expect(axiosMock.history.post.length).toBe(0);
+        expectNoDraftRows();
       });
+    });
 
-      it('should remove add-subtag row and avoid create request when cancelled', async () => {
-        const { draftRow, input } = await openSubtagDraftRow({ tagName: 'root tag 1' });
-        fireEvent.change(input, { target: { value: 'new subtag' } });
-        fireEvent.click(within(draftRow).getByText('Cancel'));
+    it('should disable Save and show required-name inline error for empty sub-tag input', async () => {
+      openActionsMenuForTag('root tag 1');
+      fireEvent.click(screen.getByRole('button', { name: 'Add Subtag' }));
+      const rows = await screen.findAllByRole('row');
+      const draftRow = rows.find(tableRow => tableRow.querySelector('input'));
+      const saveButton = within(draftRow).getByRole('button', { name: 'Save' });
+      const input = draftRow.querySelector('input');
+      fireEvent.change(input, { target: { value: ' ' } });
+
+      expect(saveButton).toBeDisabled();
+      expect(within(draftRow).getByText(/Name is required/i)).toBeInTheDocument();
+    });
 
-        await waitFor(() => {
-          expect(axiosMock.history.post.length).toBe(0);
-          expectNoDraftRows();
-        });
+    it('should keep Save disabled for whitespace-only sub-tag input', async () => {
+      openActionsMenuForTag('root tag 1');
+      fireEvent.click(screen.getByRole('button', { name: 'Add Subtag' }));
+      const rows = await screen.findAllByRole('row');
+      const draftRow = rows.find(tableRow => tableRow.querySelector('input'));
+      const input = draftRow.querySelector('input');
+      const saveButton = within(draftRow).getByRole('button', { name: 'Save' });
+
+      fireEvent.change(input, { target: { value: '   ' } });
+      expect(saveButton).toBeDisabled();
+    });
+
+    it('should disable Save and show invalid-character error for sub-tag input', async () => {
+      openActionsMenuForTag('root tag 1');
+      fireEvent.click(screen.getByRole('button', { name: 'Add Subtag' }));
+      const rows = await screen.findAllByRole('row');
+      const draftRow = rows.find(row => row.querySelector('input'));
+      const input = draftRow.querySelector('input');
+      const saveButton = within(draftRow).getByRole('button', { name: 'Save' });
+
+      fireEvent.change(input, { target: { value: 'invalid;name' } });
+      expect(saveButton).toBeDisabled();
+      expect(within(draftRow).getByText(/invalid character/i)).toBeInTheDocument();
+    });
+
+    it('should keep inline row and show failure feedback when sub-tag save fails', async () => {
+      axiosMock.onPost(createTagUrl).reply(500, {
+        error: 'Internal server error',
       });
 
-      it('should remove add-subtag row and avoid create request on escape key', async () => {
-        const { input } = await openSubtagDraftRow({ tagName: 'root tag 1' });
+      openActionsMenuForTag('root tag 1');
+      fireEvent.click(screen.getByRole('button', { name: 'Add Subtag' }));
+      const rows = await screen.findAllByRole('row');
+      const draftRow = rows.find(row => row.querySelector('input'));
+      const input = draftRow.querySelector('input');
+      fireEvent.change(input, { target: { value: 'subtag fail' } });
+      fireEvent.click(within(draftRow).getByRole('button', { name: 'Save' }));
 
-        fireEvent.change(input, { target: { value: 'new subtag' } });
-        fireEvent.keyDown(input, { key: 'Escape', code: 'Escape' });
+      await waitFor(() => {
+        expect(getDraftRows().length).toBe(1);
+      });
+      expect(await screen.findByText(/Error creating tag:/i)).toBeInTheDocument();
+    });
 
-        await waitFor(() => {
-          expect(axiosMock.history.post.length).toBe(0);
-          expectNoDraftRows();
+    it('should hide or disable Add sub-tag actions when user lacks edit permissions', async () => {
+      initializeMocks({ user: nonAdminUser });
+      const addSubtagActions = screen.queryAllByText('Add Subtag');
+      if (addSubtagActions.length === 0) {
+        expect(addSubtagActions.length).toBe(0);
+      } else {
+        addSubtagActions.forEach(action => {
+          expect(action).toBeDisabled();
         });
+      }
+    });
+  });
+
+  describe('Tag Rename Errors', () => {
+    it('should keep the inline row and show a failure toast when save request fails', async () => {
+      axiosMock.onPatch().reply(500, {
+        error: 'Internal server error',
       });
+      const { input } = await openRenameDraftRow('root tag 1');
 
-      it('should disable Save and show required-name inline error for empty sub-tag input', async () => {
-        openActionsMenuForTag('root tag 1');
-        fireEvent.click(screen.getByText('Add Subtag'));
-        const rows = await screen.findAllByRole('row');
-        const draftRow = rows.find(tableRow => tableRow.querySelector('input'));
-        const saveButton = within(draftRow).getByText('Save');
-        const input = draftRow.querySelector('input');
-        act(() => {
-          fireEvent.change(input, { target: { value: ' ' } });
-        });
+      fireEvent.change(input, { target: { value: 'will fail' } });
+      fireEvent.keyDown(input, { key: 'Enter', code: 'Enter' });
 
-        expect(saveButton).toBeDisabled();
-        expect(within(draftRow).getByText(/Name is required/i)).toBeInTheDocument();
+      let draftRow;
+      await waitFor(() => {
+        const rows = screen.getAllByRole('row');
+        const draftRows = rows.filter(row => row.querySelector('input'));
+        expect(draftRows.length).toBe(1);
+        draftRow = draftRows[0]; // eslint-disable-line prefer-destructuring
       });
 
-      it('should keep Save disabled for whitespace-only sub-tag input', async () => {
-        openActionsMenuForTag('root tag 1');
-        fireEvent.click(screen.getByText('Add Subtag'));
-        const rows = await screen.findAllByRole('row');
-        const draftRow = rows.find(tableRow => tableRow.querySelector('input'));
-        const input = draftRow.querySelector('input');
-        const saveButton = within(draftRow).getByText('Save');
+      // Banner error message should be shown at the top of the table
+      expect(await screen.findByText(/Error saving changes/i)).toBeInTheDocument();
 
-        fireEvent.change(input, { target: { value: '   ' } });
-        expect(saveButton).toBeDisabled();
+      // Toast message to indicate that the save failed
+      expect(await screen.findByText(/Error updating tag:\s*.+/i)).toBeInTheDocument();
+
+      // expect the input to retain the value that was entered before
+      expect(draftRow.querySelector('input').value).toEqual('will fail');
+      // expect the new tag to not be in the document outside the input field
+      expect(screen.queryByText('will fail')).not.toBeInTheDocument();
+    });
+  });
+
+  const tagDepthScenarios = [
+    {
+      description: 'Rename a top-level tag',
+      tagName: 'root tag 1',
+    },
+    { description: 'Rename a sub-tag', tagName: 'the child tag' },
+    { description: 'Rename a grandchild tag', tagName: 'the grandchild tag' },
+  ];
+
+  tagDepthScenarios.forEach(({ description, tagName }) => {
+    describe(description, () => {
+      beforeEach(async () => {
+        axiosMock.resetHistory();
+      });
+      it('should disable tag edit buttons if tag includes `can_edit: false`', async () => {
+        axiosMock.reset();
+        axiosMock.onGet(rootTagsListUrl).reply(200, mockTagResponseDisallowingEdits);
+        cleanup();
+        ({ axiosMock } = initializeMocks({ user: adminUser }));
+        axiosMock.onGet(rootTagsListUrl).reply(200, mockTagResponseDisallowingEdits);
+        axiosMock.onGet(subTagsUrl).reply(200, subTagsResponse);
+        renderTagListTable();
+        await waitForRootTag();
+
+        openActionsMenuForTag(tagName);
+        expect(screen.getByRole('button', { name: /Rename/i })).toBeInTheDocument();
+        expect(screen.getByRole('button', { name: /Rename/i })).toHaveAttribute('aria-disabled', 'true');
       });
 
-      it('should disable Save and show invalid-character error for sub-tag input', async () => {
-        openActionsMenuForTag('root tag 1');
-        fireEvent.click(screen.getByText('Add Subtag'));
-        const rows = await screen.findAllByRole('row');
-        const draftRow = rows.find(row => row.querySelector('input'));
-        const input = draftRow.querySelector('input');
-        const saveButton = within(draftRow).getByText('Save');
+      it('should show tag actions menu', async () => {
+        openActionsMenuForTag(tagName);
+        expect(screen.getByText('Add Subtag')).toBeInTheDocument();
+        expect(screen.getByRole('button', { name: /Rename/i })).toBeInTheDocument();
+      });
+      it('should show editable input and action buttons when Rename is selected from actions menu', async () => {
+        const { row } = await openRenameDraftRow(tagName);
+        expect(within(row).getByRole('textbox')).toBeInTheDocument();
+        // expect the input to be pre-filled with the current tag name
+        expect(within(row).getByRole('textbox').value).toEqual(tagName);
+        expect(within(row).getByRole('button', { name: /Save/i })).toBeInTheDocument();
+        expect(within(row).getByRole('button', { name: /Cancel/i })).toBeInTheDocument();
+      });
+      it('should disable Save button until the tag name is changed', async () => {
+        const { input, saveButton } = await openRenameDraftRow(tagName);
 
-        fireEvent.change(input, { target: { value: 'invalid;name' } });
         expect(saveButton).toBeDisabled();
-        expect(within(draftRow).getByText(/invalid character/i)).toBeInTheDocument();
+        fireEvent.change(input, { target: { value: `${tagName} updated` } });
+        expect(saveButton).not.toBeDisabled();
       });
+      it('should save changes and show success toast when Enter is pressed', async () => {
+        axiosMock.onPatch(/.*/).reply(200, {});
+        const { input } = await openRenameDraftRow(tagName);
 
-      it('should keep inline row and show failure feedback when sub-tag save fails', async () => {
-        axiosMock.onPost(createTagUrl).reply(500, {
-          error: 'Internal server error',
+        fireEvent.change(input, { target: { value: `${tagName} updated` } });
+        fireEvent.keyDown(input, { key: 'Enter', code: 'Enter' });
+
+        await waitFor(() => {
+          expect(axiosMock.history.patch.length).toBe(1);
+          expect(axiosMock.history.patch[0].data).toEqual(JSON.stringify({
+            tag: tagName,
+            updated_tag_value: `${tagName} updated`,
+          }));
         });
+        expect(await screen.findByText(`Tag "${tagName} updated" updated successfully`)).toBeInTheDocument();
+      });
+      it('should save changes and show success toast when Save is clicked', async () => {
+        axiosMock.onPatch(/.*/).reply(200, {});
+        const { input, saveButton } = await openRenameDraftRow(tagName);
 
-        openActionsMenuForTag('root tag 1');
-        fireEvent.click(screen.getByText('Add Subtag'));
-        const rows = await screen.findAllByRole('row');
-        const draftRow = rows.find(row => row.querySelector('input'));
-        const input = draftRow.querySelector('input');
-        fireEvent.change(input, { target: { value: 'subtag fail' } });
-        fireEvent.click(within(draftRow).getByText('Save'));
+        fireEvent.change(input, { target: { value: `${tagName} updated` } });
+        fireEvent.click(saveButton);
 
         await waitFor(() => {
-          expect(getDraftRows().length).toBe(1);
+          expect(axiosMock.history.patch.length).toBe(1);
+          expect(axiosMock.history.patch[0].data).toEqual(JSON.stringify({
+            tag: tagName,
+            updated_tag_value: `${tagName} updated`,
+          }));
         });
-        expect(await screen.findByText(/Error creating tag:/i)).toBeInTheDocument();
+        expect(await screen.findByText(`Tag "${tagName} updated" updated successfully`)).toBeInTheDocument();
+      });
+      it('should cancel editing and revert to original name when Esc is pressed', async () => {
+        const { input } = await openRenameDraftRow(tagName);
+
+        fireEvent.change(input, { target: { value: `${tagName} updated` } });
+        fireEvent.keyDown(input, { key: 'Escape', code: 'Escape' });
+
+        expect(screen.queryByRole('textbox')).not.toBeInTheDocument();
+        expect(screen.getByText(tagName)).toBeInTheDocument();
+        expect(axiosMock.history.patch.length).toBe(0);
+      });
+      it('should cancel editing and revert to original name when Cancel is clicked', async () => {
+        const { input, cancelButton } = await openRenameDraftRow(tagName);
+
+        fireEvent.change(input, { target: { value: `${tagName} updated` } });
+        fireEvent.click(cancelButton);
+
+        expect(screen.queryByRole('textbox')).not.toBeInTheDocument();
+        expect(screen.getByText(tagName)).toBeInTheDocument();
+        expect(axiosMock.history.patch.length).toBe(0);
       });
     });
+  });
 
-    it('should hide or disable Add sub-tag actions when user lacks edit permissions', async () => {
-      initializeMockApp({ authenticatedUser: nonAdminUser });
-      const addSubtagActions = screen.queryAllByText('Add Subtag');
-      if (addSubtagActions.length === 0) {
-        expect(addSubtagActions.length).toBe(0);
-      } else {
-        addSubtagActions.forEach(action => {
-          expect(action).toBeDisabled();
-        });
-      }
+  describe('Nested behavior', () => {
+    beforeEach(async () => {
+      axiosMock.resetHistory();
+    });
+
+    it('should keep the parent-child relationships in the updated tree data when renaming a parent tag', async () => {
+      // this only tests that the frontend is updated correctly before reloading data;
+      // the rest is covered by the backend tests for the rename endpoint
+
+      axiosMock.onPatch(/.*/).reply(200, {});
+      const { input, saveButton } = await openRenameDraftRow('root tag 1');
+
+      fireEvent.change(input, { target: { value: 'root tag 1 updated' } });
+      fireEvent.click(saveButton);
+
+      await waitFor(() => {
+        expect(axiosMock.history.patch.length).toBe(1);
+        expect(axiosMock.history.patch[0].data).toEqual(JSON.stringify({
+          tag: 'root tag 1',
+          updated_tag_value: 'root tag 1 updated',
+        }));
+      });
+      // make sure rows are not already expanded by checking that the child tag is not visible before expanding
+      expect(screen.queryAllByText('the child tag')?.length).toBeFalsy();
+      fireEvent.click(await screen.findByLabelText('Show Subtags'));
+      // expect the child tag to still be present under the renamed parent tag
+      expect(await screen.findByText('the child tag')).toBeInTheDocument();
+      // expect the grandchild tag to still be present under the child tag
+      openActionsMenuForTag('the child tag');
+      fireEvent.click(await screen.findByLabelText('Show Subtags'));
+      expect(await screen.findByText('the grandchild tag')).toBeInTheDocument();
     });
   });
 
@@ -785,7 +970,10 @@ describe('<TagListTable />', () => {
 
       // depth 2 is innermost when maxDepth=2, so no add-subtag action should be shown
       const grandchildTagRow = screen.getByText('the grandchild tag').closest('tr');
-      expect(within(grandchildTagRow).queryByRole('button', { name: /actions/i })).not.toBeInTheDocument();
+      expect(within(grandchildTagRow).queryByRole('button', { name: /actions/i })).toBeInTheDocument();
+      openActionsMenuForTag('the grandchild tag');
+      expect(within(grandchildTagRow).getByRole('button', { name: /Rename/i })).toBeInTheDocument();
+      expect(within(grandchildTagRow).getByText('Add Subtag')).toHaveAttribute('aria-disabled', 'true');
     });
   });
 });
@@ -793,20 +981,8 @@ describe('<TagListTable />', () => {
 // These async creation flows are intentionally isolated because they pass individually
 // but can be flaky when interleaved with the larger suite's async/query timing.
 describe('<TagListTable /> isolated async subtag tests', () => {
-  beforeAll(async () => {
-    initializeMockApp({
-      authenticatedUser: adminUser,
-    });
-    axiosMock = new MockAdapter(getAuthenticatedHttpClient());
-  });
-
   beforeEach(async () => {
-    initializeMockApp({
-      authenticatedUser: adminUser,
-    });
-    store = initializeStore();
-    axiosMock = new MockAdapter(getAuthenticatedHttpClient());
-    queryClient.clear();
+    ({ axiosMock } = initializeMocks({ user: adminUser }));
   });
 
   it('shows the spinner before the query is complete', async () => {
@@ -1005,8 +1181,7 @@ describe('<TagListTable /> pagination transition behavior', () => {
   beforeEach(() => {
     tableViewProps = null;
     mockEnterViewMode.mockReset();
-    store = initializeStore();
-    queryClient.clear();
+    initializeMocks({ user: adminUser });
 
     jest.spyOn(apiHooksModule, 'useTagListData').mockReturnValue({
       isLoading: false,
diff --git a/src/taxonomy/tag-list/TagListTable.tsx b/src/taxonomy/tag-list/TagListTable.tsx
index 01bfdbfe11..c9c80adb08 100644
--- a/src/taxonomy/tag-list/TagListTable.tsx
+++ b/src/taxonomy/tag-list/TagListTable.tsx
@@ -4,7 +4,7 @@ import React, {
   useEffect,
 } from 'react';
 import type { PaginationState } from '@tanstack/react-table';
-import { useTagListData, useCreateTag } from '../data/apiHooks';
+import { useTagListData, useCreateTag, useUpdateTag } from '../data/apiHooks';
 import { TagTree } from './tagTree';
 import { TableView } from '../tree-table';
 import type {
@@ -78,6 +78,7 @@ const TagListTable = ({ taxonomyId, maxDepth }: TagListTableProps) => {
     enabled: tableMode === TABLE_MODES.VIEW,
   });
   const createTagMutation = useCreateTag(taxonomyId);
+  const updateTagMutation = useUpdateTag(taxonomyId);
   const pageCount = tagList?.numPages ?? -1;
 
   // TODO: to make this more readable, introduce a React context for the TagListTable instead of passing props.
@@ -88,6 +89,7 @@ const TagListTable = ({ taxonomyId, maxDepth }: TagListTableProps) => {
     setTagTree,
     setDraftError,
     createTagMutation,
+    updateTagMutation,
     enterPreviewMode,
     setToast,
     setIsCreatingTopTag,
@@ -105,19 +107,19 @@ const TagListTable = ({ taxonomyId, maxDepth }: TagListTableProps) => {
       onStartDraft: enterDraftMode,
       setActiveActionMenuRowId,
       hasOpenDraft,
+      canAddTag: tagList?.canAddTag !== false,
       draftError,
       setDraftError,
       isSavingDraft: createTagMutation.isPending,
       maxDepth,
-      creatingParentId,
     }),
     [
       isCreatingTopTag,
-      editingRowId,
       tableMode,
       activeActionMenuRowId,
       hasOpenDraft,
       creatingParentId,
+      tagList?.canAddTag,
       draftError,
       createTagMutation.isPending,
       maxDepth,
@@ -155,7 +157,9 @@ const TagListTable = ({ taxonomyId, maxDepth }: TagListTableProps) => {
         isCreatingTopRow: isCreatingTopTag,
         draftError,
         createRowMutation: createTagMutation,
+        updateRowMutation: updateTagMutation,
         handleCreateRow: handleCreateTag,
+        handleUpdateRow: handleUpdateTag,
         toast,
         setToast,
         setIsCreatingTopRow: setIsCreatingTopTag,
@@ -164,6 +168,8 @@ const TagListTable = ({ taxonomyId, maxDepth }: TagListTableProps) => {
         setCreatingParentId,
         setDraftError,
         validate,
+        editingRowId,
+        setEditingRowId,
       }}
     />
   );
diff --git a/src/taxonomy/tag-list/hooks.test.tsx b/src/taxonomy/tag-list/hooks.test.tsx
index 7d799afceb..fc3dbdaebb 100644
--- a/src/taxonomy/tag-list/hooks.test.tsx
+++ b/src/taxonomy/tag-list/hooks.test.tsx
@@ -1,6 +1,6 @@
 import React from 'react';
 import { IntlProvider } from '@edx/frontend-platform/i18n';
-import { act, renderHook } from '@testing-library/react';
+import { act, renderHook, waitFor } from '@testing-library/react';
 
 import { TagTree } from './tagTree';
 import { useEditActions, useTableModes } from './hooks';
@@ -44,6 +44,8 @@ describe('useTableModes', () => {
 describe('useEditActions', () => {
   const buildActions = (overrides = {}) => {
     const createTagMutation = { mutateAsync: jest.fn() };
+    // mock updateTagMutation to have a function `mutateAsync` that returns a resolved promise
+    const updateTagMutation = { mutateAsync: jest.fn() };
     const setTagTree = jest.fn();
     const setDraftError = jest.fn();
     const enterPreviewMode = jest.fn();
@@ -63,6 +65,7 @@ describe('useEditActions', () => {
       setCreatingParentId,
       exitDraftWithoutSave,
       setEditingRowId,
+      updateTagMutation: updateTagMutation as any,
       ...(overrides as any),
     };
 
@@ -139,7 +142,9 @@ describe('useEditActions', () => {
       await actions.handleUpdateTag('updated', 'original');
     });
 
-    expect(enterPreviewMode).toHaveBeenCalled();
+    await waitFor(() => {
+      expect(enterPreviewMode).toHaveBeenCalled();
+    });
     expect(setToast).toHaveBeenCalledWith({
       show: true,
       message: 'Tag "updated" updated successfully',
diff --git a/src/taxonomy/tag-list/hooks.ts b/src/taxonomy/tag-list/hooks.ts
index a350e3eabe..f92531bae4 100644
--- a/src/taxonomy/tag-list/hooks.ts
+++ b/src/taxonomy/tag-list/hooks.ts
@@ -1,7 +1,7 @@
 import { useReducer } from 'react';
 import { useIntl } from '@edx/frontend-platform/i18n';
 
-import { useCreateTag } from '../data/apiHooks';
+import { useCreateTag, useUpdateTag } from '../data/apiHooks';
 import { TagTree } from './tagTree';
 import { TagListTableError } from './errors';
 import type { RowId } from '../tree-table/types';
@@ -45,6 +45,7 @@ interface UseEditActionsParams {
   setCreatingParentId: React.Dispatch<React.SetStateAction<RowId | null>>;
   exitDraftWithoutSave: () => void;
   setEditingRowId: React.Dispatch<React.SetStateAction<RowId | null>>;
+  updateTagMutation: ReturnType<typeof useUpdateTag>;
 }
 
 const getInlineValidationMessage = (value: string, intl: ReturnType<typeof useIntl>): string => {
@@ -111,9 +112,20 @@ const useEditActions = ({
   setToast,
   setIsCreatingTopTag,
   setCreatingParentId,
+  exitDraftWithoutSave,
   setEditingRowId,
+  updateTagMutation,
 }: UseEditActionsParams) => {
   const intl = useIntl();
+
+  const updateTableAfterRename = (oldValue: string, newValue: string) => {
+    setTagTree((currentTagTree) => {
+      const nextTree = currentTagTree || new TagTree([]);
+      nextTree.editTagValue(oldValue, newValue);
+      return nextTree;
+    });
+  };
+
   const updateTableWithoutDataReload = (value: string, parentTagValue: string | null = null) => {
     setTagTree((currentTagTree) => {
       const nextTree = currentTagTree || new TagTree([]);
@@ -179,14 +191,31 @@ const useEditActions = ({
 
   const handleUpdateTag = async (value: string, originalValue: string) => {
     const trimmed = value.trim();
-    if (trimmed && trimmed !== originalValue) {
+    if (!validate(trimmed, 'soft')) {
+      return;
+    }
+
+    if (trimmed === originalValue) {
+      setEditingRowId(null);
+      exitDraftWithoutSave();
+      return;
+    }
+
+    try {
+      setDraftError('');
+      await updateTagMutation.mutateAsync({ value: trimmed, originalValue });
+      updateTableAfterRename(originalValue, trimmed);
       enterPreviewMode();
+      setEditingRowId(null);
       setToast({
         show: true,
         message: intl.formatMessage(messages.tagUpdateSuccessMessage, { name: trimmed }),
       });
+    } catch (error) {
+      const message = intl.formatMessage(messages.tagUpdateErrorMessage, { errorMessage: (error as Error)?.message });
+      setDraftError((error as Error)?.message || intl.formatMessage(messages.tagUpdateErrorMessage, { errorMessage: '' }));
+      setToast({ show: true, message });
     }
-    setEditingRowId(null);
   };
 
   return {
diff --git a/src/taxonomy/tag-list/messages.ts b/src/taxonomy/tag-list/messages.ts
index b85c8a4696..69e74221ea 100644
--- a/src/taxonomy/tag-list/messages.ts
+++ b/src/taxonomy/tag-list/messages.ts
@@ -57,6 +57,14 @@ const messages = defineMessages({
     id: 'course-authoring.tag-list.hide-subtags.button-label',
     defaultMessage: 'Hide Subtags',
   },
+  tagUpdateErrorMessage: {
+    id: 'course-authoring.tag-list.update-error',
+    defaultMessage: 'Error updating tag: {errorMessage}',
+  },
+  renameTag: {
+    id: 'course-authoring.tag-list.rename-tag',
+    defaultMessage: 'Rename',
+  },
 });
 
 export default messages;
diff --git a/src/taxonomy/tag-list/tagColumns.tsx b/src/taxonomy/tag-list/tagColumns.tsx
index 2fad2e25c6..4f428fbdf5 100644
--- a/src/taxonomy/tag-list/tagColumns.tsx
+++ b/src/taxonomy/tag-list/tagColumns.tsx
@@ -1,6 +1,5 @@
 import {
   Bubble,
-  Button,
   Icon,
   IconButton,
   IconButtonWithTooltip,
@@ -21,6 +20,8 @@ import type {
 } from '../tree-table/types';
 import OptionalExpandLink from './OptionalExpandLink';
 
+const EDITABLE_COLUMNS = ['value'];
+
 interface TagListRowData extends TreeRowData {
   depth: number;
   childCount: number;
@@ -42,11 +43,11 @@ interface GetColumnsArgs {
   onStartDraft: () => void;
   setActiveActionMenuRowId: (id: RowId | null) => void;
   hasOpenDraft: boolean;
+  canAddTag: boolean;
   draftError: string;
   setDraftError: (error: string) => void;
   isSavingDraft: boolean;
   maxDepth: number;
-  creatingParentId: RowId | null;
 }
 
 const UsageCountDisplay = ({ row }: { row: Row<TreeRowData> }) => {
@@ -68,6 +69,7 @@ interface ActionsHeaderProps {
   setActiveActionMenuRowId: (id: RowId | null) => void;
   hasOpenDraft: boolean;
   draftInProgressHintId: string;
+  canAddTag: boolean;
 }
 
 const ActionsHeader = ({
@@ -77,6 +79,7 @@ const ActionsHeader = ({
   setEditingRowId,
   setActiveActionMenuRowId,
   hasOpenDraft,
+  canAddTag,
   draftInProgressHintId,
 }: ActionsHeaderProps) => {
   const intl = useIntl();
@@ -95,7 +98,7 @@ const ActionsHeader = ({
           setEditingRowId(null);
           setActiveActionMenuRowId(null);
         }}
-        disabled={hasOpenDraft}
+        disabled={hasOpenDraft || !canAddTag}
         aria-describedby={hasOpenDraft ? draftInProgressHintId : undefined}
       />
     </div>
@@ -106,9 +109,21 @@ interface ActionsMenuProps {
   rowData: TagListRowData;
   startSubtagDraft: () => void;
   disableAddSubtag: boolean;
+  editTag: () => void;
+  disableEditTag: boolean;
+  reachedMaxDepth: (row: Row<TreeRowData>) => boolean;
+  row: Row<TreeRowData>;
 }
 
-const ActionsMenu = ({ rowData, startSubtagDraft, disableAddSubtag }: ActionsMenuProps) => {
+const ActionsMenu = ({
+  rowData,
+  row,
+  startSubtagDraft,
+  disableAddSubtag,
+  editTag,
+  disableEditTag,
+  reachedMaxDepth,
+}: ActionsMenuProps) => {
   const intl = useIntl();
 
   return (
@@ -124,12 +139,17 @@ const ActionsMenu = ({ rowData, startSubtagDraft, disableAddSubtag }: ActionsMen
       />
       <Dropdown.Menu>
         <Dropdown.Item
-          as={Button}
           onClick={startSubtagDraft}
-          disabled={disableAddSubtag}
+          disabled={reachedMaxDepth(row) || disableAddSubtag}
         >
           {intl.formatMessage(messages.addSubtag)}
         </Dropdown.Item>
+        <Dropdown.Item
+          onClick={editTag}
+          disabled={disableEditTag}
+        >
+          {intl.formatMessage(messages.renameTag)}
+        </Dropdown.Item>
       </Dropdown.Menu>
     </Dropdown>
   );
@@ -142,13 +162,12 @@ function getColumns({
   onStartDraft,
   setActiveActionMenuRowId,
   hasOpenDraft,
+  canAddTag,
   setDraftError,
   maxDepth,
-  creatingParentId,
 }: GetColumnsArgs): TreeColumnDef[] {
-  const canAddSubtag = (row: Row<TreeRowData>) => row.depth < maxDepth;
+  const reachedMaxDepth = (row: Row<TreeRowData>) => row.depth >= maxDepth;
   const draftInProgressHintId = 'tag-list-draft-in-progress-hint';
-  const intl = useIntl();
 
   return [
     {
@@ -169,7 +188,7 @@ function getColumns({
     },
     {
       id: 'count',
-      header: intl.formatMessage(messages.tagListColumnCountHeader),
+      header: () => <FormattedMessage {...messages.tagListColumnCountHeader} />,
       cell: UsageCountDisplay,
     },
     {
@@ -183,16 +202,19 @@ function getColumns({
           setActiveActionMenuRowId={setActiveActionMenuRowId}
           hasOpenDraft={hasOpenDraft}
           draftInProgressHintId={draftInProgressHintId}
+          canAddTag={canAddTag}
         />
       ),
       cell: ({ row }) => {
         const rowData = asTagListRowData(row);
 
-        if (rowData.isNew || rowData.isEditing || !canAddSubtag(row)) {
+        if (rowData.isNew || rowData.isEditing) {
           return <div className="d-flex gap-2" />;
         }
 
-        const disableAddSubtag = hasOpenDraft && creatingParentId !== rowData.id;
+        const disableAddSubtag = hasOpenDraft || !canAddTag;
+        const disableEditTag = hasOpenDraft || row.original.canChangeTag === false;
+
         const startSubtagDraft = () => {
           onStartDraft();
           setDraftError('');
@@ -203,9 +225,26 @@ function getColumns({
           row.toggleExpanded(true);
         };
 
+        const editTag = () => {
+          onStartDraft();
+          setDraftError('');
+          setEditingRowId(`${rowData.id}:${rowData.value}`);
+          setCreatingParentId(null);
+          setIsCreatingTopTag(false);
+          setActiveActionMenuRowId(null);
+        };
+
         return (
           <div className="d-flex align-items-center justify-content-end gap-2">
-            <ActionsMenu rowData={rowData} startSubtagDraft={startSubtagDraft} disableAddSubtag={disableAddSubtag} />
+            <ActionsMenu
+              rowData={rowData}
+              row={row}
+              startSubtagDraft={startSubtagDraft}
+              disableAddSubtag={disableAddSubtag}
+              editTag={editTag}
+              disableEditTag={disableEditTag}
+              reachedMaxDepth={reachedMaxDepth}
+            />
           </div>
         );
       },
@@ -213,4 +252,4 @@ function getColumns({
   ];
 }
 
-export { getColumns };
+export { getColumns, EDITABLE_COLUMNS };
diff --git a/src/taxonomy/tree-table/CreateRow.tsx b/src/taxonomy/tree-table/CreateRow.tsx
index 57ea7dcfd2..4091db0a56 100644
--- a/src/taxonomy/tree-table/CreateRow.tsx
+++ b/src/taxonomy/tree-table/CreateRow.tsx
@@ -6,6 +6,20 @@ import { EditableCell } from './EditableCell';
 import type { CreateRowMutationState, TreeColumnDef } from './types';
 import messages from './messages';
 
+interface DraftRowProps {
+  draftError: string;
+  initialValue?: string;
+  onSave: (value: string) => void;
+  onCancel: () => void;
+  mutationState: CreateRowMutationState;
+  columns: TreeColumnDef[];
+  indent?: number;
+  validate: (value: string, mode?: 'soft' | 'hard') => boolean;
+  requireValueChangeToEnableSave?: boolean;
+  rowTestId?: string;
+  rowId?: string;
+}
+
 interface CreateRowProps {
   draftError: string;
   setDraftError: (error: string) => void;
@@ -18,57 +32,73 @@ interface CreateRowProps {
   validate: (value: string, mode?: 'soft' | 'hard') => boolean;
 }
 
-const CreateRow: React.FC<CreateRowProps> = ({
+interface EditRowProps {
+  draftError: string;
+  setDraftError: (error: string) => void;
+  initialValue: string;
+  handleUpdateRow: (value: string) => void;
+  cancelEditRow: () => void;
+  updateRowMutation: CreateRowMutationState;
+  columns: TreeColumnDef[];
+  indent?: number;
+  validate: (value: string, mode?: 'soft' | 'hard') => boolean;
+}
+
+const DraftRow: React.FC<DraftRowProps> = ({
   draftError,
-  setDraftError,
-  handleCreateRow,
-  setIsCreatingTopRow,
-  exitDraftWithoutSave,
-  createRowMutation,
+  initialValue = '',
+  onSave,
+  onCancel,
+  mutationState,
   columns,
   indent = 0,
   validate,
+  requireValueChangeToEnableSave = false,
+  rowTestId,
+  rowId,
 }) => {
-  const [newRowValue, setNewRowValue] = useState('');
-  const intl = useIntl();
+  const [rowValue, setRowValue] = useState(initialValue);
   const [saveDisabled, setSaveDisabled] = useState(true);
+  const intl = useIntl();
 
-  const handleValueChange = (e: React.ChangeEvent<HTMLInputElement>) => {
-    const { value } = e.target;
-    setNewRowValue(value);
+  const updateSaveDisabled = (value: string) => {
+    const trimmedValue = value.trim();
     const isValid = validate(value, 'soft');
-    setSaveDisabled(!isValid || createRowMutation.isPending || false);
+    const isUnchanged = requireValueChangeToEnableSave && trimmedValue === initialValue.trim();
+    setSaveDisabled(!isValid || !trimmedValue || isUnchanged || mutationState.isPending || false);
   };
 
-  const handleCancel = () => {
-    setDraftError('');
-    setNewRowValue('');
-    setIsCreatingTopRow(false);
-    exitDraftWithoutSave();
+  const handleValueChange = (e: React.ChangeEvent<HTMLInputElement>) => {
+    const { value } = e.target;
+    setRowValue(value);
+    updateSaveDisabled(value);
   };
 
   const handleSave = () => {
-    handleCreateRow(newRowValue.trim());
+    onSave(rowValue.trim());
   };
 
   const handleValueCellKeyPress = (e: React.KeyboardEvent<HTMLInputElement>) => {
-    if (e.key === 'Enter' && newRowValue.trim() && !createRowMutation.isPending && !draftError) {
+    if (e.key === 'Enter' && !saveDisabled && !draftError) {
       e.preventDefault();
       handleSave();
-    } else if (e.key === 'Escape') {
+      return;
+    }
+
+    if (e.key === 'Escape') {
       e.preventDefault();
-      handleCancel();
+      onCancel();
     }
   };
 
   return (
-
-    <tr id="creating-top-row" data-testid="creating-top-row">
+    <tr id={rowId} data-testid={rowTestId}>
       <td colSpan={1} className="py-2 pr-2 pl-0">
         <div className={`tree-table-indent tree-table-indent-${indent}`}>
           <EditableCell
+            initialValue={initialValue}
             errorMessage={draftError}
-            isSaving={createRowMutation.isPending}
+            isSaving={mutationState.isPending}
             onChange={handleValueChange}
             onKeyDown={handleValueCellKeyPress}
             autoFocus
@@ -84,7 +114,7 @@ const CreateRow: React.FC<CreateRowProps> = ({
             <Button
               variant="secondary"
               size="sm"
-              onClick={handleCancel}
+              onClick={onCancel}
             >
               {intl.formatMessage(messages.cancelButtonLabel)}
             </Button>
@@ -94,7 +124,7 @@ const CreateRow: React.FC<CreateRowProps> = ({
               {intl.formatMessage(messages.saveButtonLabel)}
             </Button>
           </span>
-          {createRowMutation.isPending && (
+          {mutationState.isPending && (
             <Spinner
               animation="border"
               role="status"
@@ -109,4 +139,67 @@ const CreateRow: React.FC<CreateRowProps> = ({
   );
 };
 
-export { CreateRow };
+const CreateRow: React.FC<CreateRowProps> = ({
+  draftError,
+  setDraftError,
+  handleCreateRow,
+  setIsCreatingTopRow,
+  exitDraftWithoutSave,
+  createRowMutation,
+  columns,
+  indent = 0,
+  validate,
+}) => {
+  const handleCancel = () => {
+    setDraftError('');
+    setIsCreatingTopRow(false);
+    exitDraftWithoutSave();
+  };
+
+  return (
+    <DraftRow
+      draftError={draftError}
+      onSave={handleCreateRow}
+      onCancel={handleCancel}
+      mutationState={createRowMutation}
+      columns={columns}
+      indent={indent}
+      validate={validate}
+      rowId="creating-top-row"
+      rowTestId="creating-top-row"
+    />
+  );
+};
+
+const EditRow: React.FC<EditRowProps> = ({
+  draftError,
+  setDraftError,
+  initialValue,
+  handleUpdateRow,
+  cancelEditRow,
+  updateRowMutation,
+  columns,
+  indent = 0,
+  validate,
+}) => {
+  const handleCancel = () => {
+    setDraftError('');
+    cancelEditRow();
+  };
+
+  return (
+    <DraftRow
+      draftError={draftError}
+      initialValue={initialValue}
+      onSave={handleUpdateRow}
+      onCancel={handleCancel}
+      mutationState={updateRowMutation}
+      columns={columns}
+      indent={indent}
+      validate={validate}
+      requireValueChangeToEnableSave
+    />
+  );
+};
+
+export { CreateRow, EditRow };
diff --git a/src/taxonomy/tree-table/NestedRows.test.tsx b/src/taxonomy/tree-table/NestedRows.test.tsx
index 1eda32fe41..7d68f5f15b 100644
--- a/src/taxonomy/tree-table/NestedRows.test.tsx
+++ b/src/taxonomy/tree-table/NestedRows.test.tsx
@@ -1,6 +1,6 @@
 import React from 'react';
 import { IntlProvider } from '@edx/frontend-platform/i18n';
-import { fireEvent, render, screen } from '@testing-library/react';
+import { fireEvent, render, screen, within } from '@testing-library/react';
 
 import NestedRows from './NestedRows';
 
@@ -8,6 +8,17 @@ const wrapper = ({ children }: { children: React.ReactNode }) => (
   <IntlProvider locale="en" messages={{}}>{children}</IntlProvider>
 );
 
+const defaultRequiredProps = {
+  setIsCreatingTopRow: jest.fn(),
+  createRowMutation: {},
+  updateRowMutation: {},
+  handleUpdateRow: jest.fn(),
+  editingRowId: null,
+  setEditingRowId: jest.fn(),
+  exitDraftWithoutSave: jest.fn(),
+  validate: () => true,
+};
+
 const makeCell = (id: string, content: string) => ({
   id,
   column: { columnDef: { cell: () => content } },
@@ -41,9 +52,7 @@ describe('NestedRows', () => {
           <NestedRows
             parentRow={parent as any}
             parentRowValue="parent"
-            setIsCreatingTopRow={jest.fn()}
-            createRowMutation={{}}
-            validate={() => true}
+            {...defaultRequiredProps}
           />
         </tbody>
       </table>,
@@ -74,9 +83,8 @@ describe('NestedRows', () => {
             creatingParentId={2}
             setCreatingParentId={setCreatingParentId}
             onCancelCreation={onCancelCreation}
-            setIsCreatingTopRow={jest.fn()}
+            {...defaultRequiredProps}
             createRowMutation={{ isPending: false }}
-            validate={() => true}
           />
         </tbody>
       </table>,
@@ -88,4 +96,35 @@ describe('NestedRows', () => {
     expect(setCreatingParentId).toHaveBeenCalledWith(null);
     expect(onCancelCreation).toHaveBeenCalled();
   });
+
+  it('renders EditRow when editingRowId matches the child row id and value', () => {
+    const nestedChild = makeRow({ id: 2, value: 'child', expanded: true });
+    const parent = makeRow({
+      id: 1,
+      value: 'parent',
+      expanded: true,
+      subRows: [nestedChild],
+    });
+
+    render(
+      <table>
+        <tbody>
+          <NestedRows
+            parentRow={parent as any}
+            parentRowValue="parent"
+            childRowsData={[nestedChild as any]}
+            {...defaultRequiredProps}
+            editingRowId="2:child"
+          />
+        </tbody>
+      </table>,
+      { wrapper },
+    );
+
+    const childInput = screen.getByDisplayValue('child');
+    const cancelButton = screen.getByRole('button', { name: /Cancel/i });
+
+    expect(childInput).toBeInTheDocument();
+    expect(cancelButton).toBeInTheDocument();
+  });
 });
diff --git a/src/taxonomy/tree-table/NestedRows.tsx b/src/taxonomy/tree-table/NestedRows.tsx
index 8facb825b7..216bcfbf18 100644
--- a/src/taxonomy/tree-table/NestedRows.tsx
+++ b/src/taxonomy/tree-table/NestedRows.tsx
@@ -4,9 +4,10 @@ import { flexRender } from '@tanstack/react-table';
 import type {
   RowId,
   TreeRow,
+  TreeColumnDef,
   CreateRowMutationState,
 } from './types';
-import { CreateRow } from './CreateRow';
+import { CreateRow, EditRow } from './CreateRow';
 
 interface NestedRowsProps {
   /** The parent row object from TanStack React Table */
@@ -35,6 +36,18 @@ interface NestedRowsProps {
   setIsCreatingTopRow: (isCreating: boolean) => void;
   /** State object for the row creation mutation (isPending, isError, error) */
   createRowMutation: CreateRowMutationState;
+  /** State object for the row update mutation (isPending, isError, error) */
+  updateRowMutation: CreateRowMutationState;
+  /** Callback when an existing row is updated (receives new value and original value) */
+  handleUpdateRow: (value: string, originalValue: string) => void;
+  /** ID of the row currently in edit mode */
+  editingRowId: RowId | null;
+  /** Setter function for which row is in edit mode */
+  setEditingRowId: (id: RowId | null) => void;
+  /** Callback to exit draft mode without saving changes */
+  exitDraftWithoutSave: () => void;
+  /** Column definitions for rendering cells in edit mode */
+  columns?: TreeColumnDef[];
   /** Validation function for new row values (receives value and optional 'soft' or 'hard' mode;
    * in 'hard' mode an exception is thrown on validation failure) */
   validate: (value: string, mode?: 'soft' | 'hard') => boolean;
@@ -67,6 +80,12 @@ const NestedRows = ({
   setCreatingParentId = () => {},
   setIsCreatingTopRow,
   createRowMutation,
+  updateRowMutation,
+  handleUpdateRow,
+  editingRowId,
+  setEditingRowId,
+  exitDraftWithoutSave,
+  columns = [],
   validate,
 }: NestedRowsProps) => {
   if (!parentRow.getIsExpanded()) {
@@ -93,26 +112,43 @@ const NestedRows = ({
         const rowData = row.original || row;
         return (
           <React.Fragment key={String(rowData.id)}>
-            <tr>
-              {row.getVisibleCells()
-                .map((cell, index) => {
-                  const content = flexRender(cell.column.columnDef.cell, cell.getContext());
-                  const isFirstColumn = index === 0;
+            {editingRowId === `${row.original.id}:${String(row.original.value)}` ? (
+              <EditRow
+                draftError={draftError}
+                setDraftError={setDraftError}
+                initialValue={String(row.original.value)}
+                handleUpdateRow={(value) => handleUpdateRow(value, String(row.original.value))}
+                cancelEditRow={() => {
+                  setEditingRowId(null);
+                  exitDraftWithoutSave();
+                }}
+                updateRowMutation={updateRowMutation}
+                columns={columns}
+                indent={indent}
+                validate={validate}
+              />
+            ) : (
+              <tr>
+                {row.getVisibleCells()
+                  .map((cell, index) => {
+                    const content = flexRender(cell.column.columnDef.cell, cell.getContext());
+                    const isFirstColumn = index === 0;
 
-                  return (
-                    <td
-                      key={cell.id}
-                      className={`p-1 align-top tree-table-overflow-anywhere ${isFirstColumn ? '' : 'tree-table-actions-column'}`}
-                    >
-                      {isFirstColumn ? (
-                        <div className={`tree-table-indent tree-table-indent-${indent}`}>{content}</div>
-                      ) : (
-                        content
-                      )}
-                    </td>
-                  );
-                })}
-            </tr>
+                    return (
+                      <td
+                        key={cell.id}
+                        className={`p-1 align-top tree-table-overflow-anywhere ${isFirstColumn ? '' : 'tree-table-actions-column'}`}
+                      >
+                        {isFirstColumn ? (
+                          <div className={`tree-table-indent tree-table-indent-${indent}`}>{content}</div>
+                        ) : (
+                          content
+                        )}
+                      </td>
+                    );
+                  })}
+              </tr>
+            )}
             <NestedRows
               parentRow={row}
               childRowsData={row.subRows as TreeRow[]}
@@ -132,6 +168,12 @@ const NestedRows = ({
               setDraftError={setDraftError}
               setIsCreatingTopRow={setIsCreatingTopRow}
               createRowMutation={createRowMutation}
+              updateRowMutation={updateRowMutation}
+              handleUpdateRow={handleUpdateRow}
+              editingRowId={editingRowId}
+              setEditingRowId={setEditingRowId}
+              exitDraftWithoutSave={exitDraftWithoutSave}
+              columns={columns}
               validate={validate}
             />
           </React.Fragment>
diff --git a/src/taxonomy/tree-table/TableBody.tsx b/src/taxonomy/tree-table/TableBody.tsx
index 77a9b7af21..6e1819a289 100644
--- a/src/taxonomy/tree-table/TableBody.tsx
+++ b/src/taxonomy/tree-table/TableBody.tsx
@@ -13,7 +13,7 @@ import type {
   TreeColumnDef,
   TreeTable,
 } from './types';
-import { CreateRow } from './CreateRow';
+import { CreateRow, EditRow } from './CreateRow';
 
 interface TableBodyProps {
   columns: TreeColumnDef[];
@@ -26,9 +26,13 @@ interface TableBodyProps {
   setCreatingParentId: (id: RowId | null) => void;
   setDraftError: (error: string) => void;
   createRowMutation: CreateRowMutationState;
+  updateRowMutation: CreateRowMutationState;
   table: TreeTable;
   isLoading: boolean;
   validate: (value: string, mode?: 'soft' | 'hard') => boolean;
+  handleUpdateRow: (value: string, originalValue: string) => void;
+  editingRowId: RowId | null;
+  setEditingRowId: (id: RowId | null) => void;
 }
 
 const TableBody = ({
@@ -42,9 +46,13 @@ const TableBody = ({
   setCreatingParentId,
   setDraftError,
   createRowMutation,
+  updateRowMutation,
   table,
   isLoading,
   validate,
+  handleUpdateRow,
+  editingRowId,
+  setEditingRowId,
 }: TableBodyProps) => {
   const intl = useIntl();
 
@@ -85,14 +93,30 @@ const TableBody = ({
 
       {table.getRowModel().rows.filter(row => row.depth === 0).map(row => (
         <React.Fragment key={row.id}>
-          <tr>
-            {row.getVisibleCells()
-              .map((cell, index) => (
-                <td key={cell.id} className={`p-1 ${index === 0 ? '' : 'tree-table-actions-column'}`}>
-                  {flexRender(cell.column.columnDef.cell, cell.getContext())}
-                </td>
-              ))}
-          </tr>
+          {editingRowId === `${row.original.id}:${String(row.original.value)}` ? (
+            <EditRow
+              draftError={draftError}
+              setDraftError={setDraftError}
+              initialValue={String(row.original.value)}
+              handleUpdateRow={(value) => handleUpdateRow(value, String(row.original.value))}
+              cancelEditRow={() => {
+                setEditingRowId(null);
+                exitDraftWithoutSave();
+              }}
+              updateRowMutation={updateRowMutation}
+              columns={columns}
+              validate={validate}
+            />
+          ) : (
+            <tr>
+              {row.getVisibleCells()
+                .map((cell, index) => (
+                  <td key={cell.id} className={`p-1 ${index === 0 ? '' : 'tree-table-actions-column'}`}>
+                    {flexRender(cell.column.columnDef.cell, cell.getContext())}
+                  </td>
+                ))}
+            </tr>
+          )}
           <NestedRows
             parentRow={row}
             childRowsData={row.subRows}
@@ -112,6 +136,12 @@ const TableBody = ({
             setDraftError={setDraftError}
             setIsCreatingTopRow={setIsCreatingTopRow}
             validate={validate}
+            updateRowMutation={updateRowMutation}
+            handleUpdateRow={handleUpdateRow}
+            editingRowId={editingRowId}
+            setEditingRowId={setEditingRowId}
+            exitDraftWithoutSave={exitDraftWithoutSave}
+            columns={columns}
           />
         </React.Fragment>
       ))}
diff --git a/src/taxonomy/tree-table/TableView.test.tsx b/src/taxonomy/tree-table/TableView.test.tsx
index 47a4720b7f..f1382eeea5 100644
--- a/src/taxonomy/tree-table/TableView.test.tsx
+++ b/src/taxonomy/tree-table/TableView.test.tsx
@@ -29,6 +29,7 @@ const baseProps = () => ({
   isCreatingTopRow: false,
   draftError: '',
   createRowMutation: { isPending: false, isError: false },
+  updateRowMutation: { isPending: false, isError: false },
   toast: { show: false, message: '', variant: 'success' },
   setToast: jest.fn(),
   setIsCreatingTopRow: jest.fn(),
@@ -38,6 +39,9 @@ const baseProps = () => ({
   setCreatingParentId: jest.fn(),
   setDraftError: jest.fn(),
   validate: jest.fn(() => true),
+  handleUpdateRow: jest.fn(),
+  editingRowId: null,
+  setEditingRowId: jest.fn(),
 });
 
 describe('TableView', () => {
diff --git a/src/taxonomy/tree-table/TableView.tsx b/src/taxonomy/tree-table/TableView.tsx
index 19f347b06d..79aa625259 100644
--- a/src/taxonomy/tree-table/TableView.tsx
+++ b/src/taxonomy/tree-table/TableView.tsx
@@ -42,6 +42,7 @@ interface TableViewProps {
   isCreatingTopRow: boolean;
   draftError: string;
   createRowMutation: CreateRowMutationState;
+  updateRowMutation: CreateRowMutationState;
   toast: ToastState;
   setToast: React.Dispatch<React.SetStateAction<ToastState>>;
   setIsCreatingTopRow: (isCreating: boolean) => void;
@@ -51,6 +52,9 @@ interface TableViewProps {
   setCreatingParentId: (id: RowId | null) => void;
   setDraftError: (error: string) => void;
   validate: (value: string, mode?: 'soft' | 'hard') => boolean;
+  handleUpdateRow: (value: string, originalValue: string) => void;
+  editingRowId: RowId | null;
+  setEditingRowId: (id: RowId | null) => void;
 }
 
 const TableView = ({
@@ -64,6 +68,7 @@ const TableView = ({
   isCreatingTopRow,
   draftError,
   createRowMutation,
+  updateRowMutation,
   handleCreateRow,
   toast,
   setToast,
@@ -73,6 +78,9 @@ const TableView = ({
   setCreatingParentId,
   setDraftError,
   validate,
+  handleUpdateRow,
+  editingRowId,
+  setEditingRowId,
 }: TableViewProps) => {
   const intl = useIntl();
 
@@ -93,11 +101,12 @@ const TableView = ({
   const currentPageIndex = table.getState().pagination.pageIndex + 1;
 
   const { isError } = createRowMutation;
+  const { isError: isUpdateError } = updateRowMutation;
   const [showError, setShowError] = React.useState(true);
 
   return (
     <>
-      {isError && showError && (
+      {(isError || isUpdateError) && showError && (
         <Alert variant="danger" icon={Info} dismissible onClose={() => setShowError(false)}>
           <Alert.Heading>
             {intl.formatMessage(messages.errorSavingTitle)}
@@ -157,9 +166,13 @@ const TableView = ({
               setCreatingParentId={setCreatingParentId}
               setDraftError={setDraftError}
               createRowMutation={createRowMutation}
+              updateRowMutation={updateRowMutation}
               table={table}
               isLoading={isLoading}
               validate={validate}
+              handleUpdateRow={handleUpdateRow}
+              editingRowId={editingRowId}
+              setEditingRowId={setEditingRowId}
             />
           </table>
         </Card.Section>