To label an axis in a MATLAB plot with the notation \bar \xi, the correct approach involves using the xlabel function with LaTeX interpreter. The syntax should be xlabel('$\bar{\xi}$', 'Interpreter', 'latex'). However, challenges arise when attempting to modify an existing .fig file using the property editor. Users report difficulties in saving changes after generating code and modifying it. Suggestions include ensuring that the figure is not locked or read-only and considering alternative methods for editing the figure, such as directly modifying the properties in the command window or recreating the figure with the desired labels from scratch.