Method 1
1. Template Backup. As usual, when you just think about making any changes to the template code, it is strongly recommended to make a complete back up of your existing template. This ensures you can easily roll back and restore your current, working template if you make any mistake.
3. Go to Layout > Edit HTML in your Blogger dashboard. This time, DO NOT check the "Expand Widget Templates" checkbox!
5. Replace the above code, with this:
<b:includable id='main'>
<b:if cond='data:title'>
<h2><data:title/></h2>
</b:if>
<div class='widget-content'>
<br/>
<select onchange='location=this.options[this.selectedIndex].value;' style='width:200px'>
<option>Labels</option>
<b:loop values='data:labels' var='label'>
<option expr:value='data:label.url'><data:label.name/>
</option>
</b:loop>
</select>
<b:include name='quickedit'/>
</div>
</b:includable>
</b:widget>
6. Modifying the Widget. To alter the phrase “Choose a label to view” which is visible when the drop down menu is contracted, you will need to go to the Layout>Edit HTML page of your Blogger dashboard and check the “Expand widget templates” box. Then search for this phrase in your template code. Simply alter the wording of this phrase to something more suitable for your blog, being careful not to alter any of the surrounding code.
4. Now look for the following code in your template
<b:includable id='main'>
<b:if cond='data:title'>
<h2><data:title/></h2>
</b:if>
<div class='widget-content'>
<ul>
<b:loop values='data:labels' var='label'>
<li>
<b:if cond='data:blog.url == data:label.url'>
<data:label.name/>
<b:else/>
<a expr:href='data:label.url'><data:label.name/></a>
</b:if>
(<data:label.count/>)
</li>
</b:loop>
</ul>
<b:include name='quickedit'/>
</div>
</b:includable>
</b:widget>
5. Note that you need to replace only the part of the displayed code IN BLUE. All the remaining text is provided for easy reference. So, replace the text IN BLUE with the text IN RED below:
<select onchange='location=this.options[this.selectedIndex].value;'>
<option>Select a label</option>
<b:loop values='data:labels' var='label'>
<option expr:value='data:label.url'><data:label.name/>
(<data:label.count/>)
</option>
</b:loop>
</select>
No matter, which method you choose, at the end of the performed modification save the template and back it up with a new name. Do not overwrite the backup file you created at the beginning, since you want to try the option for some time and decide you do not see any problems or performance drawbacks.