diff --git a/src/lib/autocomplete/autocomplete-trigger.ts b/src/lib/autocomplete/autocomplete-trigger.ts
index c645ff86e91..cdc00c36aeb 100644
--- a/src/lib/autocomplete/autocomplete-trigger.ts
+++ b/src/lib/autocomplete/autocomplete-trigger.ts
@@ -298,7 +298,7 @@ export class MdAutocompleteTrigger implements ControlValueAccessor, OnDestroy {
   _handleKeydown(event: KeyboardEvent): void {
     if (event.keyCode === ESCAPE && this.panelOpen) {
       this.closePanel();
-    } else if (this.activeOption && event.keyCode === ENTER) {
+    } else if (this.activeOption && event.keyCode === ENTER && this.panelOpen) {
       this.activeOption._selectViaInteraction();
       event.preventDefault();
     } else {
diff --git a/src/lib/autocomplete/autocomplete.spec.ts b/src/lib/autocomplete/autocomplete.spec.ts
index 425aa491e00..d043c13ee17 100644
--- a/src/lib/autocomplete/autocomplete.spec.ts
+++ b/src/lib/autocomplete/autocomplete.spec.ts
@@ -719,15 +719,28 @@ describe('MdAutocomplete', () => {
         fixture.componentInstance.trigger._handleKeydown(DOWN_ARROW_EVENT);
 
         fixture.whenStable().then(() => {
-          spyOn(ENTER_EVENT, 'preventDefault');
-
           fixture.componentInstance.trigger._handleKeydown(ENTER_EVENT);
 
-          expect(ENTER_EVENT.preventDefault).toHaveBeenCalled();
+          expect(ENTER_EVENT.defaultPrevented)
+              .toBe(true, 'Expected the default action to have been prevented.');
         });
       });
     }));
 
+    it('should not prevent the default enter action for a closed panel after a user interaction',
+      fakeAsync(() => {
+        tick();
+        fixture.componentInstance.trigger._handleKeydown(UP_ARROW_EVENT);
+        tick();
+        fixture.detectChanges();
+
+        fixture.componentInstance.trigger.closePanel();
+        fixture.detectChanges();
+        fixture.componentInstance.trigger._handleKeydown(ENTER_EVENT);
+
+        expect(ENTER_EVENT.defaultPrevented).toBe(false, 'Default action should not be prevented.');
+      }));
+
     it('should fill the text field, not select an option, when SPACE is entered', async(() => {
       fixture.whenStable().then(() => {
         typeInElement('New', input);