diff --git a/src/lib/select/select.spec.ts b/src/lib/select/select.spec.ts
index ba1c7ee3c99..280edf112b7 100644
--- a/src/lib/select/select.spec.ts
+++ b/src/lib/select/select.spec.ts
@@ -1456,6 +1456,19 @@ describe('MdSelect', () => {
           expect(Math.floor(selectedOptionLeft)).toEqual(Math.floor(triggerLeft - 16));
         }));
 
+      it('should align the first option to the trigger, if nothing is selected', fakeAsync(() => {
+        trigger.click();
+        groupFixture.detectChanges();
+
+        const triggerTop = trigger.getBoundingClientRect().top;
+        const optionTop = overlayContainerElement.querySelector('.cdk-overlay-pane md-option')
+            .getBoundingClientRect().top;
+
+        // Since the option is 18px higher than the trigger, it needs to be adjusted by 9px.
+        expect(Math.floor(optionTop))
+            .toBe(Math.floor(triggerTop - 9), 'Expected trigger to align with the first option.');
+      }));
+
     });
 
   });
diff --git a/src/lib/select/select.ts b/src/lib/select/select.ts
index e00d54ef182..642fae370e3 100644
--- a/src/lib/select/select.ts
+++ b/src/lib/select/select.ts
@@ -788,7 +788,8 @@ export class MdSelect extends _MdSelectMixinBase implements AfterContentInit, On
       // we must only adjust for the height difference between the option element
       // and the trigger element, then multiply it by -1 to ensure the panel moves
       // in the correct direction up the page.
-      this._offsetY = (SELECT_ITEM_HEIGHT - SELECT_TRIGGER_HEIGHT) / 2 * -1;
+      this._offsetY = (SELECT_ITEM_HEIGHT - SELECT_TRIGGER_HEIGHT) / 2 * -1 -
+          (this._getLabelCountBeforeOption(0) * SELECT_ITEM_HEIGHT);
     }
 
     this._checkOverlayWithinViewport(maxScroll);
@@ -863,7 +864,7 @@ export class MdSelect extends _MdSelectMixinBase implements AfterContentInit, On
     if (this.multiple) {
       offsetX = SELECT_MULTIPLE_PANEL_PADDING_X;
     } else {
-      let selected = this._selectionModel.selected[0];
+      let selected = this._selectionModel.selected[0] || this.options.first;
       offsetX = selected && selected.group ? SELECT_PANEL_INDENT_PADDING_X : SELECT_PANEL_PADDING_X;
     }