Labor capital plays a critical role in shaping enterprise competitiveness and in the allocation of macroeconomic resources, while the prominent of carbon risk significantly influences corporate labor allocation patterns. In this paper, utilizing data sampled from China's A-share listed companies between 2012 and 2021, the impact and mechanism of corporate carbon risk on labor investment efficiency have been examined. The results reveal that carbon risk significantly inhibits labor investment efficiency. Moreover, environmental uncertainty, agency problems, and managerial ability are the primary channels through which carbon risk can affect corporate labor investment efficiency. Additional tests reveal that the impact of carbon risk on labor investment efficiency is more pronounced in firms with lower competitive positions and more severe financing constraints. The detrimental effect of carbon risk on labor investment efficiency is particularly evident in firms characterized by labor underinvestment, high labor intensity, high pollution, and non-high-tech industries. The findings of this study can provide valuable insights for policymakers to improve carbon risk management, enhance labor investment efficiency, and optimize the institutional mechanisms for factor market allocation.