diff --git a/src/dropdown/docs/demo.html b/src/dropdown/docs/demo.html
index f6c16fd542..9378464610 100644
--- a/src/dropdown/docs/demo.html
+++ b/src/dropdown/docs/demo.html
@@ -70,8 +70,23 @@
         <button type="button" class="btn btn-default btn-sm" ng-click="toggleDropdown($event)">Toggle button dropdown</button>
         <button type="button" class="btn btn-warning btn-sm" ng-click="disabled = !disabled">Enable/Disable</button>
     </p>
-    
-    <script type="text/ng-template" id="dropdown.html">
+
+    <hr>
+    <!-- Single button with keyboard nav -->
+    <div class="btn-group" dropdown keyboard-nav>
+        <button type="button" class="btn btn-primary dropdown-toggle" dropdown-toggle>
+            Dropdown with keyboard navigation <span class="caret"></span>
+        </button>
+        <ul class="dropdown-menu" role="menu">
+            <li><a href="#">Action</a></li>
+            <li><a href="#">Another action</a></li>
+            <li><a href="#">Something else here</a></li>
+            <li class="divider"></li>
+            <li><a href="#">Separated link</a></li>
+        </ul>
+    </div>
+
+	<script type="text/ng-template" id="dropdown.html">
         <ul class="dropdown-menu" role="menu">
           <li><a href="#">Action in Template</a></li>
           <li><a href="#">Another action in Template</a></li>
diff --git a/src/dropdown/docs/readme.md b/src/dropdown/docs/readme.md
index 8bfc8cf2f5..ff94a1cca1 100644
--- a/src/dropdown/docs/readme.md
+++ b/src/dropdown/docs/readme.md
@@ -6,6 +6,8 @@ There is also the `on-toggle(open)` optional expression fired when dropdown chan
 Add `dropdown-append-to-body` to the `dropdown` element to append to the inner `dropdown-menu` to the body.
 This is useful when the dropdown button is inside a div with `overflow: hidden`, and the menu would otherwise be hidden.
 
+Add `keyboard-nav` to the `dropdown` element to enable navigation of dropdown list elements with the arrow keys.
+
 By default the dropdown will automatically close if any of its elements is clicked, you can change this behavior by setting the `auto-close` option as follows:
 
   * `always` - (Default) automatically closes the dropdown when any of its elements is clicked.
diff --git a/src/dropdown/dropdown.js b/src/dropdown/dropdown.js
index 816629c98c..9957957e83 100644
--- a/src/dropdown/dropdown.js
+++ b/src/dropdown/dropdown.js
@@ -10,11 +10,11 @@ angular.module('ui.bootstrap.dropdown', ['ui.bootstrap.position'])
   this.open = function( dropdownScope ) {
     if ( !openScope ) {
       $document.bind('click', closeDropdown);
-      $document.bind('keydown', escapeKeyBind);
+      $document.bind('keydown', keybindFilter);
     }
 
     if ( openScope && openScope !== dropdownScope ) {
-        openScope.isOpen = false;
+      openScope.isOpen = false;
     }
 
     openScope = dropdownScope;
@@ -24,7 +24,7 @@ angular.module('ui.bootstrap.dropdown', ['ui.bootstrap.position'])
     if ( openScope === dropdownScope ) {
       openScope = null;
       $document.unbind('click', closeDropdown);
-      $document.unbind('keydown', escapeKeyBind);
+      $document.unbind('keydown', keybindFilter);
     }
   };
 
@@ -37,7 +37,7 @@ angular.module('ui.bootstrap.dropdown', ['ui.bootstrap.position'])
 
     var toggleElement = openScope.getToggleElement();
     if ( evt && toggleElement && toggleElement[0].contains(evt.target) ) {
-        return;
+      return;
     }
 
     var $element = openScope.getElement();
@@ -52,23 +52,30 @@ angular.module('ui.bootstrap.dropdown', ['ui.bootstrap.position'])
     }
   };
 
-  var escapeKeyBind = function( evt ) {
+  var keybindFilter = function( evt ) {
     if ( evt.which === 27 ) {
       openScope.focusToggleElement();
       closeDropdown();
     }
+    else if ( openScope.isKeynavEnabled() && /(38|40)/.test(evt.which) && openScope.isOpen ) {
+      evt.preventDefault();
+      evt.stopPropagation();
+      openScope.focusDropdownEntry(evt.which);
+    }
   };
 }])
 
 .controller('DropdownController', ['$scope', '$attrs', '$parse', 'dropdownConfig', 'dropdownService', '$animate', '$position', '$document', '$compile', '$templateRequest', function($scope, $attrs, $parse, dropdownConfig, dropdownService, $animate, $position, $document, $compile, $templateRequest) {
   var self = this,
-      scope = $scope.$new(), // create a child scope so we are not polluting original one
-      templateScope,
-      openClass = dropdownConfig.openClass,
-      getIsOpen,
-      setIsOpen = angular.noop,
-      toggleInvoker = $attrs.onToggle ? $parse($attrs.onToggle) : angular.noop,
-      appendToBody = false;
+    scope = $scope.$new(), // create a child scope so we are not polluting original one
+	templateScope,
+    openClass = dropdownConfig.openClass,
+    getIsOpen,
+    setIsOpen = angular.noop,
+    toggleInvoker = $attrs.onToggle ? $parse($attrs.onToggle) : angular.noop,
+    appendToBody = false,
+    keynavEnabled =false,
+    selectedOption = null;
 
   this.init = function( element ) {
     self.$element = element;
@@ -83,6 +90,7 @@ angular.module('ui.bootstrap.dropdown', ['ui.bootstrap.position'])
     }
 
     appendToBody = angular.isDefined($attrs.dropdownAppendToBody);
+    keynavEnabled = angular.isDefined($attrs.keyboardNav);
 
     if ( appendToBody && self.dropdownMenu ) {
       $document.find('body').append( self.dropdownMenu );
@@ -113,6 +121,40 @@ angular.module('ui.bootstrap.dropdown', ['ui.bootstrap.position'])
     return self.$element;
   };
 
+  scope.isKeynavEnabled = function() {
+    return keynavEnabled;
+  };
+
+  scope.focusDropdownEntry = function(keyCode) {
+    var elems = self.dropdownMenu ? //If append to body is used.
+      (angular.element(self.dropdownMenu).find('a')) :
+      (angular.element(self.$element).find('ul').eq(0).find('a'));
+
+    switch (keyCode) {
+      case (40): {
+        if ( !angular.isNumber(self.selectedOption)) {
+          self.selectedOption = 0;
+        } else {
+          self.selectedOption = (self.selectedOption === elems.length -1 ?
+            self.selectedOption :
+            self.selectedOption + 1);
+        }
+        break;
+      }
+      case (38): {
+        if ( !angular.isNumber(self.selectedOption)) {
+          return;
+        } else {
+          self.selectedOption = (self.selectedOption === 0 ?
+            0 :
+            self.selectedOption - 1);
+        }
+        break;
+      }
+    }
+    elems[self.selectedOption].focus();
+  };
+
   scope.focusToggleElement = function() {
     if ( self.toggleElement ) {
       self.toggleElement[0].focus();
@@ -156,6 +198,7 @@ angular.module('ui.bootstrap.dropdown', ['ui.bootstrap.position'])
       }
 
       dropdownService.close( scope );
+      self.selectedOption = null;
     }
 
     setIsOpen($scope, isOpen);
@@ -203,6 +246,44 @@ angular.module('ui.bootstrap.dropdown', ['ui.bootstrap.position'])
   };
 })
 
+.directive('keyboardNav', function() {
+  return {
+    restrict: 'A',
+    require: '?^dropdown',
+    link: function (scope, element, attrs, dropdownCtrl) {
+
+      element.bind('keydown', function(e) {
+
+        if ( /(38|40)/.test(e.which)) {
+
+          e.preventDefault();
+          e.stopPropagation();
+
+          var elems = angular.element(element).find('a');
+
+          switch (e.keyCode) {
+            case (40): { // Down
+              if ( !angular.isNumber(dropdownCtrl.selectedOption)) {
+                dropdownCtrl.selectedOption = 0;
+              } else {
+                dropdownCtrl.selectedOption = (dropdownCtrl.selectedOption === elems.length -1 ? dropdownCtrl.selectedOption : dropdownCtrl.selectedOption+1);
+              }
+
+            }
+            break;
+            case (38): { // Up
+              dropdownCtrl.selectedOption = (dropdownCtrl.selectedOption === 0 ? 0 : dropdownCtrl.selectedOption-1);
+            }
+            break;
+          }
+          elems[dropdownCtrl.selectedOption].focus();
+        }
+      });
+    }
+
+  };
+})
+
 .directive('dropdownToggle', function() {
   return {
     require: '?^dropdown',
diff --git a/src/dropdown/test/dropdown.spec.js b/src/dropdown/test/dropdown.spec.js
index fc99695dbf..ee7fcf8097 100644
--- a/src/dropdown/test/dropdown.spec.js
+++ b/src/dropdown/test/dropdown.spec.js
@@ -468,4 +468,186 @@ describe('dropdownToggle', function() {
       expect(elm1.hasClass(dropdownConfig.openClass)).toBe(true);
     });
   });
+
+  describe('`keyboard-nav` option', function() {
+    function dropdown() {
+      return $compile('<li dropdown keyboard-nav><a href dropdown-toggle></a><ul><li><a href>Hello</a></li><li><a href>Hello Again</a></li></ul></li>')($rootScope);
+    }
+    beforeEach(function() {
+      element = dropdown();
+    });
+
+    it('should focus first list element when down arrow pressed', function() {
+      $document.find('body').append(element);
+      clickDropdownToggle();
+      triggerKeyDown($document, 40);
+
+      expect(element.hasClass(dropdownConfig.openClass)).toBe(true);
+      var optionEl = element.find('ul').eq(0).find('a').eq(0);
+      expect(isFocused(optionEl)).toBe(true);
+    });
+
+    it('should not focus first list element when down arrow pressed if closed', function() {
+      $document.find('body').append(element);
+      triggerKeyDown($document, 40);
+
+      expect(element.hasClass(dropdownConfig.openClass)).toBe(false);
+      var focusEl = element.find('ul').eq(0).find('a').eq(0);
+      expect(isFocused(focusEl)).toBe(false);
+    });
+
+    it('should focus second list element when down arrow pressed twice', function() {
+      $document.find('body').append(element);
+      clickDropdownToggle();
+      triggerKeyDown($document, 40);
+      triggerKeyDown($document, 40);
+
+      expect(element.hasClass(dropdownConfig.openClass)).toBe(true);
+      var focusEl = element.find('ul').eq(0).find('a').eq(1);
+      expect(isFocused(focusEl)).toBe(true);
+    });
+  });
+
+  describe('`keyboard-nav` option', function() {
+    function dropdown() {
+      return $compile('<li dropdown keyboard-nav><a href dropdown-toggle></a><ul><li><a href>Hello</a></li><li><a href>Hello Again</a></li></ul></li>')($rootScope);
+    }
+    beforeEach(function() {
+      element = dropdown();
+    });
+
+    it('should focus first list element when down arrow pressed', function() {
+      $document.find('body').append(element);
+      clickDropdownToggle();
+      triggerKeyDown($document, 40);
+
+      expect(element.hasClass(dropdownConfig.openClass)).toBe(true);
+      var focusEl = element.find('ul').eq(0).find('a').eq(0);
+      expect(isFocused(focusEl)).toBe(true);
+    });
+
+    it('should not focus first list element when up arrow pressed after dropdown toggled', function() {
+      $document.find('body').append(element);
+      clickDropdownToggle();
+      expect(element.hasClass(dropdownConfig.openClass)).toBe(true);
+
+      triggerKeyDown($document, 38);
+      var focusEl = element.find('ul').eq(0).find('a').eq(0);
+      expect(isFocused(focusEl)).toBe(false);
+    });
+
+    it('should not focus any list element when down arrow pressed if closed', function() {
+      $document.find('body').append(element);
+      triggerKeyDown($document, 40);
+
+      expect(element.hasClass(dropdownConfig.openClass)).toBe(false);
+      var focusEl = element.find('ul').eq(0).find('a');
+      expect(isFocused(focusEl[0])).toBe(false);
+      expect(isFocused(focusEl[1])).toBe(false);
+    });
+
+    it('should not change focus when other keys are pressed', function() {
+      $document.find('body').append(element);
+      clickDropdownToggle();
+      triggerKeyDown($document, 37);
+
+      expect(element.hasClass(dropdownConfig.openClass)).toBe(true);
+      var focusEl = element.find('ul').eq(0).find('a');
+      expect(isFocused(focusEl[0])).toBe(false);
+      expect(isFocused(focusEl[1])).toBe(false);
+    });
+
+    it('should focus second list element when down arrow pressed twice', function() {
+      $document.find('body').append(element);
+      clickDropdownToggle();
+      triggerKeyDown($document, 40);
+      triggerKeyDown($document, 40);
+
+      expect(element.hasClass(dropdownConfig.openClass)).toBe(true);
+      var focusEl = element.find('ul').eq(0).find('a').eq(1);
+      expect(isFocused(focusEl)).toBe(true);
+    });
+
+    it('should focus first list element when down arrow pressed 2x and up pressed 1x', function() {
+      $document.find('body').append(element);
+      clickDropdownToggle();
+      triggerKeyDown($document, 40);
+      triggerKeyDown($document, 40);
+
+      triggerKeyDown($document, 38);
+
+      expect(element.hasClass(dropdownConfig.openClass)).toBe(true);
+      var focusEl = element.find('ul').eq(0).find('a').eq(0);
+      expect(isFocused(focusEl)).toBe(true);
+    });
+
+    it('should stay focused on final list element if down pressed at list end', function() {
+      $document.find('body').append(element);
+      clickDropdownToggle();
+      triggerKeyDown($document, 40);
+      triggerKeyDown($document, 40);
+
+      expect(element.hasClass(dropdownConfig.openClass)).toBe(true);
+      var focusEl = element.find('ul').eq(0).find('a').eq(1);
+      expect(isFocused(focusEl)).toBe(true);
+
+      triggerKeyDown($document, 40);
+      expect(isFocused(focusEl)).toBe(true);
+    });
+
+    it('should close if esc is pressed while focused', function() {
+      element = dropdown('disabled');
+      $document.find('body').append(element);
+      clickDropdownToggle();
+
+      triggerKeyDown($document, 40);
+
+      expect(element.hasClass(dropdownConfig.openClass)).toBe(true);
+      var focusEl = element.find('ul').eq(0).find('a').eq(0);
+      expect(isFocused(focusEl)).toBe(true);
+
+      triggerKeyDown($document, 27);
+      expect(element.hasClass(dropdownConfig.openClass)).toBe(false);
+    });
+  });
+
+  describe('`keyboard-nav` option with `dropdown-append-to-body` option', function() {
+    function dropdown() {
+      return $compile('<li dropdown dropdown-append-to-body keyboard-nav><a href dropdown-toggle></a><ul class="dropdown-menu" id="dropdown-menu"><li><a href>Hello On Body</a></li><li><a href>Hello Again</a></li></ul></li>')($rootScope);
+    }
+
+    beforeEach(function() {
+      element = dropdown();
+    });
+
+    it('should focus first list element when down arrow pressed', function() {
+      clickDropdownToggle();
+
+      triggerKeyDown($document, 40);
+
+      expect(element.hasClass(dropdownConfig.openClass)).toBe(true);
+      var focusEl = $document.find('ul').eq(0).find('a');
+      expect(isFocused(focusEl)).toBe(true);
+    });
+
+    it('should not focus first list element when down arrow pressed if closed', function() {
+      triggerKeyDown($document, 40);
+
+      expect(element.hasClass(dropdownConfig.openClass)).toBe(false);
+      var focusEl = $document.find('ul').eq(0).find('a');
+      expect(isFocused(focusEl)).toBe(false);
+    });
+
+    it('should focus second list element when down arrow pressed twice', function() {
+      clickDropdownToggle();
+      triggerKeyDown($document, 40);
+      triggerKeyDown($document, 40);
+
+      expect(element.hasClass(dropdownConfig.openClass)).toBe(true);
+      var elem1 = $document.find('ul');
+      var elem2 = elem1.find('a');
+      var focusEl = $document.find('ul').eq(0).find('a').eq(1);
+      expect(isFocused(focusEl)).toBe(true);
+    });
+  });
 });