Why I can't change my folder color anymore?

OMG...how annoying.
My fix: 
1. Click on OneDrive icon in system tray.

2. View online. 🌐 (Click)

3. When online in your One Drive, click the ... and scroll down to More>.

4. Select Folder Color.

Voila!

So grateful for this particular thread. Thought I was going MAD because I had just made some color changes about 3 weeks ago.

And the saga continues - I was setting folder color from File Explorer just fine until about one or two weeks ago. And now it behaves inconsistently.
First, I try to change the folder color, no option anywhere in File Explorer - not in OneDrive sub-menu, not in Properties, not in Options.
Then I try again, and in OneDrive submenu it appears, but dimmed:

Then, one minute later, it is not there:

Absolutely weird - yes, it works when I do View Online and actually do this online in OneDrive, but it is inconsistent in File Explorer, and it bothers me more that it is intermittently showing (dimmed) and disappearing... My OneDrive is constantly on and syncing all the time so no problems there...

Yet another Microsoft mystery - and I am thinking it may have something to do with OneDrive (online) itself and the way it is coordinating/synchronizing functionality across to File Explorer. But if it was there and was working fine, why is it now intermittent or missing (and messing around)?

And is there any Microsoft advisor, consultant or tech support seeing this?
It may be a bug somewhere, either in OneDrive or in File Explorer....

I read all the comments here and I agree, one can do this from One Drive, but you are correct too, I used to be able to do it from File Explorer just as you describe...until today 😒 I don't always work within my OneDrive environment (kinda clunky IMO).

I also faced this issue.

It's a OneDrive option.
You're supposed to be able to right-click>OneDrive>Folder colour, however this was greyed out for me.
I resolved it by viewing the OneDrive folder online and changing folder colour there.
Once changed online, the change reflected on the local version after a few seconds.

If it is folder from Onedrive then:

1. find the folder in File Manger
2. right click on folder
3. choose Onedrive option
4. click Folder color from submenu
5. and finally choose color

If this is the feature I think it is, it only works for OneDrive folders.

You can right-click a folder inside your OneDrive directory in File Explorer and select Folder colour (this may be under a OneDrive submenu) to assign a colour.

That change syncs across devices and is even reflected in the OneDrive web interface.

Right click > Properties > Customize tab > Change icon

Sometimes, after updates or system changes, options might not appear as they should. To check if the option is still available:

1. Right-click on the folder you want to change.
2. Select Show more options (if not already in the context menu).
3. Look for the option to change the color. If it's missing, it might indicate a problem with the shell extensions.