diff --git a/src/lib/autocomplete/autocomplete-trigger.ts b/src/lib/autocomplete/autocomplete-trigger.ts
index 1b773673e843..64912f092f95 100644
--- a/src/lib/autocomplete/autocomplete-trigger.ts
+++ b/src/lib/autocomplete/autocomplete-trigger.ts
@@ -114,7 +114,7 @@ export class MdAutocompleteTrigger implements ControlValueAccessor, OnDestroy {
 
   /* Whether or not the autocomplete panel is open. */
   get panelOpen(): boolean {
-    return this._panelOpen;
+    return this._panelOpen && this.autocomplete.showPanel;
   }
 
   /** Opens the autocomplete suggestion panel. */
diff --git a/src/lib/autocomplete/autocomplete.spec.ts b/src/lib/autocomplete/autocomplete.spec.ts
index 78eb4a4b118c..fd7ad0c6480e 100644
--- a/src/lib/autocomplete/autocomplete.spec.ts
+++ b/src/lib/autocomplete/autocomplete.spec.ts
@@ -15,6 +15,7 @@ import {MdAutocomplete} from './autocomplete';
 import {MdInputContainer} from '../input/input-container';
 import {Observable} from 'rxjs/Observable';
 import {dispatchFakeEvent} from '../core/testing/dispatch-events';
+import {typeInElement} from '../core/testing/type-in-element';
 
 import 'rxjs/add/operator/map';
 
@@ -66,35 +67,39 @@ describe('MdAutocomplete', () => {
       input = fixture.debugElement.query(By.css('input')).nativeElement;
     });
 
-    it('should open the panel when the input is focused', () => {
+    it('should open the panel when the input is focused', async(() => {
       expect(fixture.componentInstance.trigger.panelOpen)
           .toBe(false, `Expected panel state to start out closed.`);
 
       dispatchFakeEvent(input, 'focus');
-      fixture.detectChanges();
+      fixture.whenStable().then(() => {
+        fixture.detectChanges();
 
-      expect(fixture.componentInstance.trigger.panelOpen)
-          .toBe(true, `Expected panel state to read open when input is focused.`);
-      expect(overlayContainerElement.textContent)
-          .toContain('Alabama', `Expected panel to display when input is focused.`);
-      expect(overlayContainerElement.textContent)
-          .toContain('California', `Expected panel to display when input is focused.`);
-    });
+        expect(fixture.componentInstance.trigger.panelOpen)
+            .toBe(true, `Expected panel state to read open when input is focused.`);
+        expect(overlayContainerElement.textContent)
+            .toContain('Alabama', `Expected panel to display when input is focused.`);
+        expect(overlayContainerElement.textContent)
+            .toContain('California', `Expected panel to display when input is focused.`);
+      });
+    }));
 
-    it('should open the panel programmatically', () => {
+    it('should open the panel programmatically', async(() => {
       expect(fixture.componentInstance.trigger.panelOpen)
           .toBe(false, `Expected panel state to start out closed.`);
 
       fixture.componentInstance.trigger.openPanel();
-      fixture.detectChanges();
+      fixture.whenStable().then(() => {
+        fixture.detectChanges();
 
-      expect(fixture.componentInstance.trigger.panelOpen)
-          .toBe(true, `Expected panel state to read open when opened programmatically.`);
-      expect(overlayContainerElement.textContent)
-          .toContain('Alabama', `Expected panel to display when opened programmatically.`);
-      expect(overlayContainerElement.textContent)
-          .toContain('California', `Expected panel to display when opened programmatically.`);
-    });
+        expect(fixture.componentInstance.trigger.panelOpen)
+            .toBe(true, `Expected panel state to read open when opened programmatically.`);
+        expect(overlayContainerElement.textContent)
+            .toContain('Alabama', `Expected panel to display when opened programmatically.`);
+        expect(overlayContainerElement.textContent)
+            .toContain('California', `Expected panel to display when opened programmatically.`);
+      });
+    }));
 
     it('should close the panel when blurred', async(() => {
       dispatchFakeEvent(input, 'focus');
@@ -190,8 +195,6 @@ describe('MdAutocomplete', () => {
         fixture.whenStable().then(() => {
           fixture.detectChanges();
 
-          expect(fixture.componentInstance.trigger.panelOpen)
-            .toBe(true, `Expected panel to stay open when options list is empty.`);
           expect(panel.classList)
               .toContain('mat-autocomplete-hidden', `Expected panel to hide itself when empty.`);
         });
@@ -774,20 +777,43 @@ describe('MdAutocomplete', () => {
           .toBe('false', 'Expected aria-expanded to be false while panel is closed.');
 
       fixture.componentInstance.trigger.openPanel();
-      fixture.detectChanges();
+      fixture.whenStable().then(() => {
+        fixture.detectChanges();
 
-      expect(input.getAttribute('aria-expanded'))
-          .toBe('true', 'Expected aria-expanded to be true while panel is open.');
+        expect(input.getAttribute('aria-expanded'))
+            .toBe('true', 'Expected aria-expanded to be true while panel is open.');
 
-      fixture.componentInstance.trigger.closePanel();
-      fixture.detectChanges();
+        fixture.componentInstance.trigger.closePanel();
+        fixture.detectChanges();
 
-      fixture.whenStable().then(() => {
-        expect(input.getAttribute('aria-expanded'))
-            .toBe('false', 'Expected aria-expanded to be false when panel closes again.');
+        fixture.whenStable().then(() => {
+          expect(input.getAttribute('aria-expanded'))
+              .toBe('false', 'Expected aria-expanded to be false when panel closes again.');
+        });
       });
     }));
 
+    it('should set aria-expanded properly when the panel is hidden', async(() => {
+        fixture.componentInstance.trigger.openPanel();
+
+        fixture.whenStable().then(() => {
+          fixture.detectChanges();
+          expect(input.getAttribute('aria-expanded'))
+              .toBe('true', 'Expected aria-expanded to be true while panel is open.');
+
+          typeInElement('zz', input);
+          fixture.whenStable().then(() => {
+            fixture.detectChanges();
+
+            fixture.whenStable().then(() => {
+              fixture.detectChanges();
+              expect(input.getAttribute('aria-expanded'))
+                  .toBe('false', 'Expected aria-expanded to be false when panel hides itself.');
+            });
+          });
+        });
+    }));
+
     it('should set aria-owns based on the attached autocomplete', () => {
       fixture.componentInstance.trigger.openPanel();
       fixture.detectChanges();
@@ -901,21 +927,24 @@ describe('MdAutocomplete', () => {
       });
     }));
 
-    it('should work when input is wrapped in ngIf', () => {
+    it('should work when input is wrapped in ngIf', async(() => {
       const fixture = TestBed.createComponent(NgIfAutocomplete);
       fixture.detectChanges();
 
       const input = fixture.debugElement.query(By.css('input')).nativeElement;
       dispatchFakeEvent(input, 'focus');
-      fixture.detectChanges();
 
-      expect(fixture.componentInstance.trigger.panelOpen)
-          .toBe(true, `Expected panel state to read open when input is focused.`);
-      expect(overlayContainerElement.textContent)
-          .toContain('One', `Expected panel to display when input is focused.`);
-      expect(overlayContainerElement.textContent)
-          .toContain('Two', `Expected panel to display when input is focused.`);
-    });
+      fixture.whenStable().then(() => {
+        fixture.detectChanges();
+
+        expect(fixture.componentInstance.trigger.panelOpen)
+            .toBe(true, `Expected panel state to read open when input is focused.`);
+        expect(overlayContainerElement.textContent)
+            .toContain('One', `Expected panel to display when input is focused.`);
+        expect(overlayContainerElement.textContent)
+            .toContain('Two', `Expected panel to display when input is focused.`);
+      });
+    }));
 
     it('should filter properly with ngIf after setting the active item', fakeAsync(() => {
       const fixture = TestBed.createComponent(NgIfAutocomplete);
@@ -1086,18 +1115,6 @@ class AutocompleteWithNgModel {
 
 }
 
-/**
- * Focuses an input, sets its value and dispatches
- * the `input` event, simulating the user typing.
- * @param value Value to be set on the input.
- * @param element Element onto which to set the value.
- */
-function typeInElement(value: string, element: HTMLInputElement, autoFocus = true) {
-  element.focus();
-  element.value = value;
-  dispatchFakeEvent(element, 'input');
-}
-
 /** This is a mock keyboard event to test keyboard events in the autocomplete. */
 class MockKeyboardEvent {
   constructor(public keyCode: number) {}
diff --git a/src/lib/core/testing/type-in-element.ts b/src/lib/core/testing/type-in-element.ts
new file mode 100644
index 000000000000..326bee5a6d51
--- /dev/null
+++ b/src/lib/core/testing/type-in-element.ts
@@ -0,0 +1,13 @@
+import {dispatchFakeEvent} from './dispatch-events';
+
+/**
+ * Focuses an input, sets its value and dispatches
+ * the `input` event, simulating the user typing.
+ * @param value Value to be set on the input.
+ * @param element Element onto which to set the value.
+ */
+export function typeInElement(value: string, element: HTMLInputElement, autoFocus = true) {
+  element.focus();
+  element.value = value;
+  dispatchFakeEvent(element, 'input');
+}