diff --git a/moto/core/responses.py b/moto/core/responses.py
--- a/moto/core/responses.py
+++ b/moto/core/responses.py
@@ -725,20 +725,6 @@ def _get_map_prefix(self, param_prefix, key_end=".key", value_end=".value"):
 
         return results
 
-    def _parse_tag_specification(self):
-        # [{"ResourceType": _type, "Tag": [{"Key": k, "Value": v}, ..]}]
-        tag_spec = self._get_multi_param("TagSpecification")
-        # {_type: {k: v, ..}}
-        tags = {}
-        for spec in tag_spec:
-            if spec["ResourceType"] not in tags:
-                tags[spec["ResourceType"]] = {}
-            tags[spec["ResourceType"]].update(
-                {tag["Key"]: tag["Value"] for tag in spec["Tag"]}
-            )
-
-        return tags
-
     def _get_object_map(self, prefix, name="Name", value="Value"):
         """
         Given a query dict like
diff --git a/moto/ec2/_models/instances.py b/moto/ec2/_models/instances.py
--- a/moto/ec2/_models/instances.py
+++ b/moto/ec2/_models/instances.py
@@ -22,6 +22,7 @@
     random_reservation_id,
     filter_reservations,
     utc_date_and_time,
+    convert_tag_spec,
 )
 
 
@@ -70,6 +71,13 @@ def __init__(self, ec2_backend, image_id, user_data, security_groups, **kwargs):
             self.image_id = template_version.image_id
         else:
             self.image_id = image_id
+        # Check if we have tags to process
+        if launch_template_arg:
+            template_version = ec2_backend._get_template_from_args(launch_template_arg)
+            tag_spec_set = template_version.data.get("TagSpecification", {})
+            tags = convert_tag_spec(tag_spec_set)
+            instance_tags = tags.get("instance", {})
+            self.add_tags(instance_tags)
 
         self._state = InstanceState("running", 16)
         self._reason = ""
diff --git a/moto/ec2/_models/spot_requests.py b/moto/ec2/_models/spot_requests.py
--- a/moto/ec2/_models/spot_requests.py
+++ b/moto/ec2/_models/spot_requests.py
@@ -11,6 +11,7 @@
     random_spot_fleet_request_id,
     random_spot_request_id,
     generic_filter,
+    convert_tag_spec,
 )
 
 
@@ -249,7 +250,8 @@ def __init__(
             launch_specs_from_config.append(new_launch_template)
 
         for spec in (launch_specs or []) + launch_specs_from_config:
-            tags = self._extract_tags(spec)
+            tag_spec_set = spec.get("TagSpecificationSet", [])
+            tags = convert_tag_spec(tag_spec_set)
             self.launch_specs.append(
                 SpotFleetLaunchSpec(
                     ebs_optimized=spec.get("EbsOptimized"),
@@ -270,19 +272,6 @@ def __init__(
         self.spot_requests = []
         self.create_spot_requests(self.target_capacity)
 
-    def _extract_tags(self, spec):
-        # IN:  [{"ResourceType": _type, "Tag": [{"Key": k, "Value": v}, ..]}]
-        # OUT: {_type: {k: v, ..}}
-        tag_spec_set = spec.get("TagSpecificationSet", [])
-        tags = {}
-        for tag_spec in tag_spec_set:
-            if tag_spec["ResourceType"] not in tags:
-                tags[tag_spec["ResourceType"]] = {}
-            tags[tag_spec["ResourceType"]].update(
-                {tag["Key"]: tag["Value"] for tag in tag_spec["Tag"]}
-            )
-        return tags
-
     @property
     def physical_resource_id(self):
         return self.id
diff --git a/moto/ec2/responses/_base_response.py b/moto/ec2/responses/_base_response.py
--- a/moto/ec2/responses/_base_response.py
+++ b/moto/ec2/responses/_base_response.py
@@ -1,4 +1,5 @@
 from moto.core.responses import BaseResponse
+from ..utils import convert_tag_spec
 
 
 class EC2BaseResponse(BaseResponse):
@@ -7,3 +8,9 @@ def _filters_from_querystring(self):
         _filters = self._get_multi_param("Filter.")
         # return {x1: y1, ...}
         return {f["Name"]: f["Value"] for f in _filters}
+
+    def _parse_tag_specification(self):
+        # [{"ResourceType": _type, "Tag": [{"Key": k, "Value": v}, ..]}]
+        tag_spec_set = self._get_multi_param("TagSpecification")
+        # {_type: {k: v, ..}}
+        return convert_tag_spec(tag_spec_set)
diff --git a/moto/ec2/utils.py b/moto/ec2/utils.py
--- a/moto/ec2/utils.py
+++ b/moto/ec2/utils.py
@@ -773,3 +773,16 @@ def gen_moto_amis(described_images, drop_images_missing_keys=True):
                 raise err
 
     return result
+
+
+def convert_tag_spec(tag_spec_set):
+    # IN:  [{"ResourceType": _type, "Tag": [{"Key": k, "Value": v}, ..]}]
+    # OUT: {_type: {k: v, ..}}
+    tags = {}
+    for tag_spec in tag_spec_set:
+        if tag_spec["ResourceType"] not in tags:
+            tags[tag_spec["ResourceType"]] = {}
+        tags[tag_spec["ResourceType"]].update(
+            {tag["Key"]: tag["Value"] for tag in tag_spec["Tag"]}
+        )
+    return tags

Hi @dkatzbuc, thanks for raising this - doesn't look like this behaviour is implemented yet. Marking it as an enhancement.
diff --git a/tests/test_ec2/test_instances.py b/tests/test_ec2/test_instances.py
--- a/tests/test_ec2/test_instances.py
+++ b/tests/test_ec2/test_instances.py
@@ -2170,6 +2170,29 @@ def test_create_instance_with_launch_template_id_produces_no_warning(
     assert len(captured_warnings) == 0
 
 
+@mock_ec2
+def test_create_instance_from_launch_template__process_tags():
+    client = boto3.client("ec2", region_name="us-west-1")
+
+    template = client.create_launch_template(
+        LaunchTemplateName=str(uuid4()),
+        LaunchTemplateData={
+            "ImageId": EXAMPLE_AMI_ID,
+            "TagSpecifications": [
+                {"ResourceType": "instance", "Tags": [{"Key": "k", "Value": "v"}]}
+            ],
+        },
+    )["LaunchTemplate"]
+
+    instance = client.run_instances(
+        MinCount=1,
+        MaxCount=1,
+        LaunchTemplate={"LaunchTemplateId": template["LaunchTemplateId"]},
+    )["Instances"][0]
+
+    instance.should.have.key("Tags").equals([{"Key": "k", "Value": "v"}])
+
+
 @mock_ec2
 def test_run_instance_and_associate_public_ip():
     ec2 = boto3.resource("ec2", "us-west-1")

When creating ec2 instances from launch template via run_instances, the instances aren't tagged
I'm using moto in pytest. I have created a launch template using `create_launch_template`. This template is created with `TagSpecifications` for instance and volume.

Upon using `run_instances` to create new instances based on this launch template, their tags are empty. Is this to be expected?

tests/test_ec2/test_instances.py::test_create_instance_from_launch_template__process_tags
tests/test_ec2/test_instances.py::test_run_instance_with_block_device_mappings_missing_ebs tests/test_ec2/test_instances.py::test_get_instances_filtering_by_tag tests/test_ec2/test_instances.py::test_run_instance_and_associate_public_ip tests/test_ec2/test_instances.py::test_modify_instance_attribute_security_groups tests/test_ec2/test_instances.py::test_run_instance_cannot_have_subnet_and_networkinterface_parameter tests/test_ec2/test_instances.py::test_create_with_volume_tags tests/test_ec2/test_instances.py::test_get_instances_filtering_by_subnet_id tests/test_ec2/test_instances.py::test_run_instance_with_placement tests/test_ec2/test_instances.py::test_describe_instance_status_with_instances tests/test_ec2/test_instances.py::test_get_instances_filtering_by_dns_name tests/test_ec2/test_instances.py::test_filter_wildcard_in_specified_tag_only tests/test_ec2/test_instances.py::test_get_instances_filtering_by_reason_code tests/test_ec2/test_instances.py::test_get_instances_filtering_by_account_id tests/test_ec2/test_instances.py::test_describe_instance_status_no_instances tests/test_ec2/test_instances.py::test_run_instance_with_block_device_mappings_using_no_device tests/test_ec2/test_instances.py::test_get_instance_by_security_group tests/test_ec2/test_instances.py::test_create_with_tags tests/test_ec2/test_instances.py::test_instance_terminate_discard_volumes tests/test_ec2/test_instances.py::test_instance_terminate_detach_volumes tests/test_ec2/test_instances.py::test_run_instance_with_nic_preexisting tests/test_ec2/test_instances.py::test_instance_detach_volume_wrong_path tests/test_ec2/test_instances.py::test_instance_attribute_source_dest_check tests/test_ec2/test_instances.py::test_run_instance_with_nic_autocreated tests/test_ec2/test_instances.py::test_run_instance_with_block_device_mappings_from_snapshot tests/test_ec2/test_instances.py::test_get_instances_filtering_by_instance_id tests/test_ec2/test_instances.py::test_get_instances_filtering_by_tag_name tests/test_ec2/test_instances.py::test_instance_attach_volume tests/test_ec2/test_instances.py::test_get_instances_filtering_by_ni_private_dns tests/test_ec2/test_instances.py::test_describe_instance_status_with_non_running_instances tests/test_ec2/test_instances.py::test_warn_on_invalid_ami tests/test_ec2/test_instances.py::test_run_instance_with_security_group_name tests/test_ec2/test_instances.py::test_describe_instances_filter_vpcid_via_networkinterface tests/test_ec2/test_instances.py::test_get_paginated_instances tests/test_ec2/test_instances.py::test_get_instances_filtering_by_image_id tests/test_ec2/test_instances.py::test_describe_instances_dryrun tests/test_ec2/test_instances.py::test_instance_reboot tests/test_ec2/test_instances.py::test_run_instance_with_new_nic_and_security_groups tests/test_ec2/test_instances.py::test_run_instance_with_keypair tests/test_ec2/test_instances.py::test_instance_start_and_stop tests/test_ec2/test_instances.py::test_ec2_classic_has_public_ip_address tests/test_ec2/test_instances.py::test_describe_instance_status_with_instance_filter_deprecated tests/test_ec2/test_instances.py::test_describe_instance_attribute tests/test_ec2/test_instances.py::test_terminate_empty_instances tests/test_ec2/test_instances.py::test_instance_terminate_keep_volumes_implicit tests/test_ec2/test_instances.py::test_run_instance_with_block_device_mappings tests/test_ec2/test_instances.py::test_instance_termination_protection tests/test_ec2/test_instances.py::test_get_instances_filtering_by_source_dest_check tests/test_ec2/test_instances.py::test_get_instances_filtering_by_architecture tests/test_ec2/test_instances.py::test_run_instance_mapped_public_ipv4 tests/test_ec2/test_instances.py::test_instance_terminate_keep_volumes_explicit tests/test_ec2/test_instances.py::test_get_instances_filtering_by_instance_type tests/test_ec2/test_instances.py::test_create_instance_ebs_optimized tests/test_ec2/test_instances.py::test_instance_launch_and_terminate tests/test_ec2/test_instances.py::test_instance_attribute_instance_type tests/test_ec2/test_instances.py::test_user_data_with_run_instance tests/test_ec2/test_instances.py::test_get_instances_filtering_by_private_dns tests/test_ec2/test_instances.py::test_get_instances_filtering_by_instance_group_id tests/test_ec2/test_instances.py::test_instance_with_nic_attach_detach tests/test_ec2/test_instances.py::test_get_instances_filtering_by_instance_group_name tests/test_ec2/test_instances.py::test_terminate_unknown_instances tests/test_ec2/test_instances.py::test_modify_delete_on_termination tests/test_ec2/test_instances.py::test_add_servers tests/test_ec2/test_instances.py::test_get_instances_filtering_by_vpc_id tests/test_ec2/test_instances.py::test_run_instance_with_instance_type tests/test_ec2/test_instances.py::test_run_multiple_instances_in_same_command tests/test_ec2/test_instances.py::test_get_instances_filtering_by_state tests/test_ec2/test_instances.py::test_run_instance_with_default_placement tests/test_ec2/test_instances.py::test_run_instance_with_subnet tests/test_ec2/test_instances.py::test_instance_lifecycle tests/test_ec2/test_instances.py::test_run_instance_with_block_device_mappings_missing_size tests/test_ec2/test_instances.py::test_get_instances_by_id tests/test_ec2/test_instances.py::test_run_instance_with_security_group_id tests/test_ec2/test_instances.py::test_describe_instance_credit_specifications tests/test_ec2/test_instances.py::test_get_instances_filtering_by_tag_value tests/test_ec2/test_instances.py::test_describe_instance_status_with_instance_filter tests/test_ec2/test_instances.py::test_run_instance_with_specified_private_ipv4 tests/test_ec2/test_instances.py::test_instance_attribute_user_data