diff --git a/src/lib/autocomplete/autocomplete-trigger.ts b/src/lib/autocomplete/autocomplete-trigger.ts
index 207701b3291..c0d0281f1a4 100644
--- a/src/lib/autocomplete/autocomplete-trigger.ts
+++ b/src/lib/autocomplete/autocomplete-trigger.ts
@@ -109,9 +109,9 @@ export function getMdAutocompleteMissingPanelError(): Error {
     '[attr.aria-owns]': 'autocomplete?.id',
     // Note: we use `focusin`, as opposed to `focus`, in order to open the panel
     // a little earlier. This avoids issues where IE delays the focusing of the input.
-    '(focusin)': 'openPanel()',
-    '(input)': '_handleInput($event)',
+    '(focusin)': '_handleFocus()',
     '(blur)': '_onTouched()',
+    '(input)': '_handleInput($event)',
     '(keydown)': '_handleKeydown($event)',
   },
   providers: [MD_AUTOCOMPLETE_VALUE_ACCESSOR]
@@ -169,26 +169,8 @@ export class MdAutocompleteTrigger implements ControlValueAccessor, OnDestroy {
 
   /** Opens the autocomplete suggestion panel. */
   openPanel(): void {
-    if (!this.autocomplete) {
-      throw getMdAutocompleteMissingPanelError();
-    }
-
-    if (!this._overlayRef) {
-      this._createOverlay();
-    } else {
-      /** Update the panel width, in case the host width has changed */
-      this._overlayRef.getState().width = this._getHostWidth();
-      this._overlayRef.updateSize();
-    }
-
-    if (this._overlayRef && !this._overlayRef.hasAttached()) {
-      this._overlayRef.attach(this._portal);
-      this._closingActionsSubscription = this._subscribeToClosingActions();
-    }
-
-    this.autocomplete._setVisibility();
+    this._attachOverlay();
     this._floatPlaceholder();
-    this._panelOpen = true;
   }
 
   /** Closes the autocomplete suggestion panel. */
@@ -327,14 +309,25 @@ export class MdAutocompleteTrigger implements ControlValueAccessor, OnDestroy {
     }
   }
 
+  _handleFocus(): void {
+    this._attachOverlay();
+    this._floatPlaceholder(true);
+  }
+
   /**
    * In "auto" mode, the placeholder will animate down as soon as focus is lost.
    * This causes the value to jump when selecting an option with the mouse.
    * This method manually floats the placeholder until the panel can be closed.
+   * @param shouldAnimate Whether the placeholder should be animated when it is floated.
    */
-  private _floatPlaceholder(): void {
+  private _floatPlaceholder(shouldAnimate = false): void {
     if (this._formField && this._formField.floatPlaceholder === 'auto') {
-      this._formField.floatPlaceholder = 'always';
+      if (shouldAnimate) {
+        this._formField._animateAndLockPlaceholder();
+      } else {
+        this._formField.floatPlaceholder = 'always';
+      }
+
       this._manuallyFloatingPlaceholder = true;
     }
   }
@@ -450,9 +443,27 @@ export class MdAutocompleteTrigger implements ControlValueAccessor, OnDestroy {
     });
   }
 
-  private _createOverlay(): void {
-    this._portal = new TemplatePortal(this.autocomplete.template, this._viewContainerRef);
-    this._overlayRef = this._overlay.create(this._getOverlayConfig());
+  private _attachOverlay(): void {
+    if (!this.autocomplete) {
+      throw getMdAutocompleteMissingPanelError();
+    }
+
+    if (!this._overlayRef) {
+      this._portal = new TemplatePortal(this.autocomplete.template, this._viewContainerRef);
+      this._overlayRef = this._overlay.create(this._getOverlayConfig());
+    } else {
+      /** Update the panel width, in case the host width has changed */
+      this._overlayRef.getState().width = this._getHostWidth();
+      this._overlayRef.updateSize();
+    }
+
+    if (this._overlayRef && !this._overlayRef.hasAttached()) {
+      this._overlayRef.attach(this._portal);
+      this._closingActionsSubscription = this._subscribeToClosingActions();
+    }
+
+    this.autocomplete._setVisibility();
+    this._panelOpen = true;
   }
 
   private _getOverlayConfig(): OverlayState {
diff --git a/src/lib/autocomplete/autocomplete.spec.ts b/src/lib/autocomplete/autocomplete.spec.ts
index f9bf7961fb2..91f7f6a5e0f 100644
--- a/src/lib/autocomplete/autocomplete.spec.ts
+++ b/src/lib/autocomplete/autocomplete.spec.ts
@@ -377,6 +377,16 @@ describe('MdAutocomplete', () => {
           .toContain('mat-autocomplete-visible', 'Expected panel to be visible.');
     }));
 
+    it('should animate the placeholder when the input is focused', () => {
+      const inputContainer = fixture.componentInstance.formField;
+
+      spyOn(inputContainer, '_animateAndLockPlaceholder');
+      expect(inputContainer._animateAndLockPlaceholder).not.toHaveBeenCalled();
+
+      dispatchFakeEvent(fixture.debugElement.query(By.css('input')).nativeElement, 'focusin');
+      expect(inputContainer._animateAndLockPlaceholder).toHaveBeenCalled();
+    });
+
   });
 
   it('should have the correct text direction in RTL', () => {
diff --git a/src/lib/form-field/form-field.html b/src/lib/form-field/form-field.html
index cfb7bfedab8..d34e8b7c40f 100644
--- a/src/lib/form-field/form-field.html
+++ b/src/lib/form-field/form-field.html
@@ -16,6 +16,7 @@
                [class.mat-form-field-float]="_canPlaceholderFloat"
                [class.mat-accent]="color == 'accent'"
                [class.mat-warn]="color == 'warn'"
+               #placeholder
                *ngIf="_hasPlaceholder()">
           <ng-content select="md-placeholder, mat-placeholder"></ng-content>
           {{_control.placeholder}}
diff --git a/src/lib/form-field/form-field.ts b/src/lib/form-field/form-field.ts
index eba04bde979..bf545b58453 100644
--- a/src/lib/form-field/form-field.ts
+++ b/src/lib/form-field/form-field.ts
@@ -35,13 +35,14 @@ import {
   MD_PLACEHOLDER_GLOBAL_OPTIONS,
   PlaceholderOptions
 } from '../core/placeholder/placeholder-options';
-import {startWith} from '@angular/cdk/rxjs';
+import {startWith, first} from '@angular/cdk/rxjs';
 import {MdError} from './error';
 import {MdFormFieldControl} from './form-field-control';
 import {MdHint} from './hint';
 import {MdPlaceholder} from './placeholder';
 import {MdPrefix} from './prefix';
 import {MdSuffix} from './suffix';
+import {fromEvent} from 'rxjs/observable/fromEvent';
 
 
 let nextUniqueId = 0;
@@ -104,8 +105,13 @@ export class MdFormField implements AfterViewInit, AfterContentInit, AfterConten
   }
   private _hideRequiredMarker: boolean;
 
+  /** Override for the logic that disables the placeholder animation in certain cases. */
+  private _showAlwaysAnimate = false;
+
   /** Whether the floating label should always float or not. */
-  get _shouldAlwaysFloat() { return this._floatPlaceholder === 'always'; }
+  get _shouldAlwaysFloat() {
+    return this._floatPlaceholder === 'always' && !this._showAlwaysAnimate;
+  }
 
   /** Whether the placeholder can float or not. */
   get _canPlaceholderFloat() { return this._floatPlaceholder !== 'never'; }
@@ -139,6 +145,7 @@ export class MdFormField implements AfterViewInit, AfterContentInit, AfterConten
   /** Reference to the form field's underline element. */
   @ViewChild('underline') underlineRef: ElementRef;
   @ViewChild('connectionContainer') _connectionContainerRef: ElementRef;
+  @ViewChild('placeholder') private _placeholder: ElementRef;
   @ContentChild(MdFormFieldControl) _control: MdFormFieldControl<any>;
   @ContentChild(MdPlaceholder) _placeholderChild: MdPlaceholder;
   @ContentChildren(MdError) _errorChildren: QueryList<MdError>;
@@ -210,6 +217,20 @@ export class MdFormField implements AfterViewInit, AfterContentInit, AfterConten
         this._control.errorState) ? 'error' : 'hint';
   }
 
+  /** Animates the placeholder up and locks it in position. */
+  _animateAndLockPlaceholder(): void {
+    if (this._placeholder && this._canPlaceholderFloat) {
+      this._showAlwaysAnimate = true;
+      this._floatPlaceholder = 'always';
+
+      first.call(fromEvent(this._placeholder.nativeElement, 'transitionend')).subscribe(() => {
+        this._showAlwaysAnimate = false;
+      });
+
+      this._changeDetectorRef.markForCheck();
+    }
+  }
+
   /**
    * Ensure that there is only one placeholder (either `placeholder` attribute on the child control
    * or child element with the `md-placeholder` directive).
diff --git a/src/lib/input/input.spec.ts b/src/lib/input/input.spec.ts
index 3c8b344ca4d..ade499ec53d 100644
--- a/src/lib/input/input.spec.ts
+++ b/src/lib/input/input.spec.ts
@@ -15,7 +15,7 @@ import {MdInputModule} from './index';
 import {MdInput} from './input';
 import {Platform} from '../core/platform/platform';
 import {PlatformModule} from '../core/platform/index';
-import {wrappedErrorMessage, dispatchFakeEvent} from '@angular/cdk/testing';
+import {wrappedErrorMessage, dispatchFakeEvent, createFakeEvent} from '@angular/cdk/testing';
 import {
   MdFormField,
   MdFormFieldModule,
@@ -656,6 +656,33 @@ describe('MdInput without forms', function () {
 
     expect(container.classList).toContain('mat-focused');
   });
+
+  it('should be able to animate the placeholder up and lock it in position', () => {
+    let fixture = TestBed.createComponent(MdInputTextTestController);
+    fixture.detectChanges();
+
+    let inputContainer = fixture.debugElement.query(By.directive(MdFormField))
+        .componentInstance as MdFormField;
+    let placeholder = fixture.debugElement.query(By.css('.mat-input-placeholder')).nativeElement;
+
+    expect(inputContainer.floatPlaceholder).toBe('auto');
+
+    inputContainer._animateAndLockPlaceholder();
+    fixture.detectChanges();
+
+    expect(inputContainer._shouldAlwaysFloat).toBe(false);
+    expect(inputContainer.floatPlaceholder).toBe('always');
+
+    const fakeEvent = Object.assign(createFakeEvent('transitionend'), {
+      propertyName: 'transform'
+    });
+
+    placeholder.dispatchEvent(fakeEvent);
+    fixture.detectChanges();
+
+    expect(inputContainer._shouldAlwaysFloat).toBe(true);
+    expect(inputContainer.floatPlaceholder).toBe('always');
+  });
 });
 
 describe('MdInput with forms', () => {