diff --git a/src/lib/button-toggle/button-toggle.html b/src/lib/button-toggle/button-toggle.html
index face84340cfa..2f73348c495d 100644
--- a/src/lib/button-toggle/button-toggle.html
+++ b/src/lib/button-toggle/button-toggle.html
@@ -5,6 +5,8 @@
          [checked]="checked"
          [disabled]="disabled"
          [name]="name"
+         (blur)="_onInputBlur()"
+         (focus)="_onInputFocus()"
          (change)="_onInputChange($event)"
          (click)="_onInputClick($event)">
 
@@ -12,3 +14,5 @@
     <ng-content></ng-content>
   </div>
 </label>
+<!-- the touchstart handler prevents the overlay from capturing the initial tap on touch devices -->
+<div class="mat-button-toggle-focus-overlay" (touchstart)="$event.preventDefault()"></div>
diff --git a/src/lib/button-toggle/button-toggle.scss b/src/lib/button-toggle/button-toggle.scss
index 78a54939c765..7185f4a58ca1 100644
--- a/src/lib/button-toggle/button-toggle.scss
+++ b/src/lib/button-toggle/button-toggle.scss
@@ -1,4 +1,5 @@
 @import '../core/style/elevation';
+@import '../core/a11y/a11y';
 
 $mat-button-toggle-padding: 0 16px !default;
 $mat-button-toggle-line-height: 36px !default;
@@ -34,6 +35,11 @@ $mat-button-toggle-border-radius: 2px !default;
 .mat-button-toggle {
   white-space: nowrap;
   font-family: $mat-font-family;
+  position: relative;
+}
+
+.mat-button-toggle.mat-button-toggle-focus .mat-button-toggle-focus-overlay {
+  opacity: 1;
 }
 
 .mat-button-toggle-label-content {
@@ -47,3 +53,27 @@ $mat-button-toggle-border-radius: 2px !default;
 .mat-button-toggle-label-content > * {
   vertical-align: middle;
 }
+
+// Overlay to be used as a tint. Note that the same effect can be achieved by using a pseudo
+// element, however we use a proper DOM element in order to be able to disable the default
+// touch action. This makes the buttons more responsive on touch devices.
+.mat-button-toggle-focus-overlay {
+  // The button spec calls for focus on raised buttons (and FABs) to be indicated with a
+  // black, 12% opacity shade over the normal color (for both light and dark themes).
+  background-color: rgba(black, 0.12);
+  border-radius: inherit;
+  pointer-events: none;
+  opacity: 0;
+  position: absolute;
+  top: 0;
+  left: 0;
+  bottom: 0;
+  right: 0;
+
+  @include cdk-high-contrast {
+    // Note that IE will render this in the same way, no
+    // matter whether the theme is light or dark. This helps
+    // with the readability of focused buttons.
+    background-color: rgba(white, 0.5);
+  }
+}
diff --git a/src/lib/button-toggle/button-toggle.ts b/src/lib/button-toggle/button-toggle.ts
index a34cbb15134b..56e99f45d7f1 100644
--- a/src/lib/button-toggle/button-toggle.ts
+++ b/src/lib/button-toggle/button-toggle.ts
@@ -276,7 +276,6 @@ export class MdButtonToggleGroupMultiple {
   set vertical(value) {
     this._vertical = coerceBooleanProperty(value);
   }
-
 }
 
 /** Single button inside of a toggle group. */
@@ -287,13 +286,21 @@ export class MdButtonToggleGroupMultiple {
   styleUrls: ['button-toggle.css'],
   encapsulation: ViewEncapsulation.None,
   host: {
-    '[class.mat-button-toggle]': 'true'
+    '[class.mat-button-toggle-focus]': '_hasFocus',
+    '[class.mat-button-toggle]': 'true',
+    '(mousedown)': '_setMousedown()',
   }
 })
 export class MdButtonToggle implements OnInit {
   /** Whether or not this button toggle is checked. */
   private _checked: boolean = false;
 
+  /** Whether the button has focus. Used for class binding. */
+  _hasFocus: boolean = false;
+
+  /** Whether a mousedown has occurred on this element in the last 100ms. */
+  _isMouseDown: boolean = false;
+
   /** Type of the button toggle. Either 'radio' or 'checkbox'. */
   _type: ToggleType;
 
@@ -461,10 +468,31 @@ export class MdButtonToggle implements OnInit {
     event.stopPropagation();
   }
 
+  _onInputFocus() {
+    // Only show the focus / ripple indicator when the focus was not triggered by a mouse
+    // interaction on the component.
+    if (!this._isMouseDown) {
+      this._hasFocus = true;
+    }
+  }
+
+  _onInputBlur() {
+    this._hasFocus = false;
+  }
+
   /** Focuses the button. */
   focus() {
     this._renderer.invokeElementMethod(this._inputElement.nativeElement, 'focus');
   }
+
+  _setMousedown() {
+    // We only *show* the focus style when focus has come to the button via the keyboard.
+    // The Material Design spec is silent on this topic, and without doing this, the
+    // button continues to look :active after clicking.
+    // @see http://marcysutton.com/button-focus-hell/
+    this._isMouseDown = true;
+    setTimeout(() => { this._isMouseDown = false; }, 100);
+  }
 }