diff --git a/src/lib/core/a11y/list-key-manager.ts b/src/lib/core/a11y/list-key-manager.ts
index 4458ca9a80e..3dd1bfd6a03 100644
--- a/src/lib/core/a11y/list-key-manager.ts
+++ b/src/lib/core/a11y/list-key-manager.ts
@@ -1,5 +1,7 @@
-import {EventEmitter, Output, QueryList} from '@angular/core';
+import {QueryList} from '@angular/core';
 import {UP_ARROW, DOWN_ARROW, TAB} from '../core';
+import {Observable} from 'rxjs/Observable';
+import {Subject} from 'rxjs/Subject';
 
 /**
  * This is the interface for focusable items (used by the ListKeyManager).
@@ -16,15 +18,18 @@ export interface MdFocusable {
  */
 export class ListKeyManager {
   private _focusedItemIndex: number;
-
-  /**
-   * This event is emitted any time the TAB key is pressed, so components can react
-   * when focus is shifted off of the list.
-   */
-  @Output() tabOut = new EventEmitter<void>();
+  private _tabOut: Subject<any> = new Subject();
 
   constructor(private _items: QueryList<MdFocusable>) {}
 
+  /**
+   * Observable that emits any time the TAB key is pressed, so components can react
+   * when focus is shifted off of the list.
+   */
+  get tabOut(): Observable<void> {
+    return this._tabOut.asObservable();
+  }
+
   set focusedItemIndex(value: number) {
     this._focusedItemIndex = value;
   }
@@ -35,7 +40,7 @@ export class ListKeyManager {
     } else if (event.keyCode === UP_ARROW) {
       this._focusPreviousItem();
     } else if (event.keyCode === TAB) {
-      this.tabOut.emit();
+      this._tabOut.next(null);
     }
   }
 
diff --git a/src/lib/menu/menu-directive.ts b/src/lib/menu/menu-directive.ts
index 600e793bc3d..b91d92728b0 100644
--- a/src/lib/menu/menu-directive.ts
+++ b/src/lib/menu/menu-directive.ts
@@ -1,11 +1,13 @@
 // TODO(kara): prevent-close functionality
 
 import {
+  AfterContentInit,
   Attribute,
   Component,
   ContentChildren,
   EventEmitter,
   Input,
+  OnDestroy,
   Output,
   QueryList,
   TemplateRef,
@@ -17,6 +19,7 @@ import {MdMenuInvalidPositionX, MdMenuInvalidPositionY} from './menu-errors';
 import {MdMenuItem} from './menu-item';
 import {ListKeyManager} from '../core/a11y/list-key-manager';
 import {MdMenuPanel} from './menu-panel';
+import {Subscription} from 'rxjs/Subscription';
 
 @Component({
   moduleId: module.id,
@@ -27,10 +30,13 @@ import {MdMenuPanel} from './menu-panel';
   encapsulation: ViewEncapsulation.None,
   exportAs: 'mdMenu'
 })
-export class MdMenu implements MdMenuPanel {
+export class MdMenu implements AfterContentInit, MdMenuPanel, OnDestroy {
   private _keyManager: ListKeyManager;
 
-  // config object to be passed into the menu's ngClass
+  /** Subscription to tab events on the menu panel */
+  private _tabSubscription: Subscription;
+
+  /** Config object to be passed into the menu's ngClass */
   _classList: Object;
 
   positionX: MenuPositionX = 'after';
@@ -45,11 +51,20 @@ export class MdMenu implements MdMenuPanel {
     if (posY) { this._setPositionY(posY); }
   }
 
+  // TODO: internal
   ngAfterContentInit() {
     this._keyManager = new ListKeyManager(this.items);
-    this._keyManager.tabOut.subscribe(() => this._emitCloseEvent());
+    this._tabSubscription = this._keyManager.tabOut.subscribe(() => {
+      this._emitCloseEvent();
+    });
   }
 
+  // TODO: internal
+  ngOnDestroy() {
+    this._tabSubscription.unsubscribe();
+  }
+
+
   /**
    * This method takes classes set on the host md-menu element and applies them on the
    * menu template that displays in the overlay container.  Otherwise, it's difficult