diff --git a/src/lib/select/select-animations.ts b/src/lib/select/select-animations.ts
index ce3e24c67b8c..238341138c39 100644
--- a/src/lib/select/select-animations.ts
+++ b/src/lib/select/select-animations.ts
@@ -42,16 +42,26 @@ export const transformPlaceholder: AnimationEntryMetadata = trigger('transformPl
  * When the panel is removed from the DOM, it simply fades out linearly.
  */
 export const transformPanel: AnimationEntryMetadata = trigger('transformPanel', [
-  state('showing-ltr', style({
+  state('top-ltr', style({
     opacity: 1,
     width: 'calc(100% + 32px)',
     transform: `translate3d(-16px, -9px, 0) scaleY(1)`
   })),
-  state('showing-rtl', style({
+  state('top-rtl', style({
     opacity: 1,
     width: 'calc(100% + 32px)',
     transform: `translate3d(16px, -9px, 0) scaleY(1)`
   })),
+  state('bottom-ltr', style({
+    opacity: 1,
+    width: 'calc(100% + 32px)',
+    transform: `translate3d(-16px, 8px, 0) scaleY(1)`
+  })),
+  state('bottom-rtl', style({
+    opacity: 1,
+    width: 'calc(100% + 32px)',
+    transform: `translate3d(16px, 8px, 0) scaleY(1)`
+  })),
   transition('void => *', [
     style({
       opacity: 0,
diff --git a/src/lib/select/select.html b/src/lib/select/select.html
index a3b7074dd427..f95dc6b1c6e8 100644
--- a/src/lib/select/select.html
+++ b/src/lib/select/select.html
@@ -5,9 +5,10 @@
 </div>
 
 <template connected-overlay [origin]="origin"  [open]="panelOpen" hasBackdrop (backdropClick)="close()"
-  backdropClass="md-overlay-transparent-backdrop" [positions]="_positions" [width]="_getWidth()">
+  backdropClass="md-overlay-transparent-backdrop" [positions]="_positions" [width]="_getWidth()"
+  (positionChange)="_updateTransformOrigin($event)">
   <div class="md-select-panel" [@transformPanel]="_getPanelState()" (@transformPanel.done)="_onPanelDone()"
-    (keydown)="_keyManager.onKeydown($event)">
+    (keydown)="_keyManager.onKeydown($event)" [style.transformOrigin]="_transformOrigin">
     <div class="md-select-content" [@fadeInContent]="'showing'">
       <ng-content></ng-content>
     </div>
diff --git a/src/lib/select/select.spec.ts b/src/lib/select/select.spec.ts
index add405463856..542a7753daf6 100644
--- a/src/lib/select/select.spec.ts
+++ b/src/lib/select/select.spec.ts
@@ -7,6 +7,7 @@ import {MdSelect} from './select';
 import {MdOption} from './option';
 import {Dir} from '../core/rtl/dir';
 import {FormControl, FormsModule, ReactiveFormsModule} from '@angular/forms';
+import {ViewportRuler} from '../core/overlay/position/viewport-ruler';
 
 describe('MdSelect', () => {
   let overlayContainerElement: HTMLElement;
@@ -19,17 +20,33 @@ describe('MdSelect', () => {
       providers: [
         {provide: OverlayContainer, useFactory: () => {
           overlayContainerElement = document.createElement('div');
+
+          // add fixed positioning to match real overlay container styles
+          overlayContainerElement.style.position = 'fixed';
+          overlayContainerElement.style.top = '0';
+          overlayContainerElement.style.left = '0';
+          document.body.appendChild(overlayContainerElement);
+
+          // remove body padding to keep consistent cross-browser
+          document.body.style.padding = '0';
+          document.body.style.margin = '0';
+
           return {getContainerElement: () => overlayContainerElement};
         }},
         {provide: Dir, useFactory: () => {
           return dir = { value: 'ltr' };
-        }}
+        }},
+        {provide: ViewportRuler, useClass: FakeViewportRuler}
       ]
     });
 
     TestBed.compileComponents();
   }));
 
+  afterEach(() => {
+    document.body.removeChild(overlayContainerElement);
+  });
+
   describe('overlay panel', () => {
     let fixture: ComponentFixture<BasicSelect>;
     let trigger: HTMLElement;
@@ -457,7 +474,7 @@ describe('MdSelect', () => {
 
         trigger.click();
         fixture.detectChanges();
-        expect(fixture.componentInstance.select._getPanelState()).toEqual('showing-ltr');
+        expect(fixture.componentInstance.select._getPanelState()).toEqual('top-ltr');
       });
 
       it('should use the rtl panel state when the dir is rtl', () => {
@@ -465,11 +482,70 @@ describe('MdSelect', () => {
 
         trigger.click();
         fixture.detectChanges();
-        expect(fixture.componentInstance.select._getPanelState()).toEqual('showing-rtl');
+        expect(fixture.componentInstance.select._getPanelState()).toEqual('top-rtl');
       });
 
   });
 
+  describe('positioning', () => {
+    let fixture: ComponentFixture<BasicSelect>;
+    let trigger: HTMLElement;
+
+    beforeEach(() => {
+      fixture = TestBed.createComponent(BasicSelect);
+      fixture.detectChanges();
+      trigger = fixture.debugElement.query(By.css('.md-select-trigger')).nativeElement;
+    });
+
+    it('should open below the trigger if the panel will fit', () => {
+      trigger.click();
+      fixture.detectChanges();
+
+      const overlayPane = overlayContainerElement.children[0] as HTMLElement;
+      const overlayRect = overlayPane.getBoundingClientRect();
+      const triggerRect = trigger.getBoundingClientRect();
+
+      // when the select panel opens below the trigger, the tops of the trigger and the overlay
+      // should be aligned.
+      expect(overlayRect.top.toFixed(2))
+          .toEqual(triggerRect.top.toFixed(2), `Expected panel to open below by default.`);
+
+      // animation should match the position
+      expect(fixture.componentInstance.select._getPanelState())
+          .toEqual('top-ltr', `Expected panel animation values to match the position.`);
+      expect(fixture.componentInstance.select._transformOrigin)
+          .toBe('top', `Expected panel animation to originate at the top.`);
+    });
+
+    it('should open above the trigger if there is not space below for the panel', () => {
+      // Push trigger to the bottom part of viewport, so it doesn't have space to open
+      // in its default position below the trigger.
+      trigger.style.position = 'relative';
+      trigger.style.top = '650px';
+
+      trigger.click();
+      fixture.detectChanges();
+
+      const overlayPane = overlayContainerElement.children[0] as HTMLElement;
+      const overlayRect = overlayPane.getBoundingClientRect();
+      const triggerRect = trigger.getBoundingClientRect();
+
+      // In "above" position, the bottom edges of the overlay and the origin are aligned.
+      // To find the overlay top, subtract the panel height from the origin's bottom edge.
+      const expectedTop = triggerRect.bottom - overlayRect.height;
+      expect(overlayRect.top.toFixed(2))
+          .toEqual(expectedTop.toFixed(2),
+              `Expected panel to open above the trigger if below wouldn't fit.`);
+
+      // animation should match the position
+      expect(fixture.componentInstance.select._getPanelState())
+          .toEqual('bottom-ltr', `Expected panel animation values to match the position.`);
+      expect(fixture.componentInstance.select._transformOrigin)
+          .toBe('bottom', `Expected panel animation to originate at the bottom.`);
+    });
+
+  });
+
   describe('accessibility', () => {
     let fixture: ComponentFixture<BasicSelect>;
 
@@ -658,3 +734,15 @@ function dispatchEvent(eventName: string, element: HTMLElement): void {
   event.initEvent(eventName, true, true);
   element.dispatchEvent(event);
 }
+
+class FakeViewportRuler {
+  getViewportRect() {
+    return {
+      left: 0, top: 0, width: 1014, height: 686, bottom: 686, right: 1014
+    };
+  }
+
+  getViewportScrollPosition() {
+    return {top: 0, left: 0};
+  }
+}
diff --git a/src/lib/select/select.ts b/src/lib/select/select.ts
index 2b876e4676f0..6f3b762b5e5f 100644
--- a/src/lib/select/select.ts
+++ b/src/lib/select/select.ts
@@ -21,6 +21,7 @@ import {Subscription} from 'rxjs/Subscription';
 import {transformPlaceholder, transformPanel, fadeInContent} from './select-animations';
 import {ControlValueAccessor, NgControl} from '@angular/forms';
 import {coerceBooleanProperty} from '../core/coersion/boolean-property';
+import {ConnectedOverlayPositionChange} from '../core/overlay/position/connected-position';
 
 @Component({
   moduleId: module.id,
@@ -77,16 +78,29 @@ export class MdSelect implements AfterContentInit, ControlValueAccessor, OnDestr
   /** View -> model callback called when select has been touched */
   _onTouched: Function;
 
-  /** This position config ensures that the top left corner of the overlay
-   * is aligned with with the top left of the origin (overlapping the trigger
-   * completely). In RTL mode, the top right corners are aligned instead.
+  /** The value of the select panel's transform-origin property. */
+  _transformOrigin: string = 'top';
+
+  /**
+   * This position config ensures that the top "start" corner of the overlay
+   * is aligned with with the top "start" of the origin by default (overlapping
+   * the trigger completely). If the panel cannot fit below the trigger, it
+   * will fall back to a position above the trigger.
    */
-  _positions = [{
-    originX: 'start',
-    originY: 'top',
-    overlayX: 'start',
-    overlayY: 'top'
-  }];
+  _positions = [
+    {
+      originX: 'start',
+      originY: 'top',
+      overlayX: 'start',
+      overlayY: 'top',
+    },
+    {
+      originX: 'start',
+      originY: 'bottom',
+      overlayX: 'start',
+      overlayY: 'bottom',
+    },
+  ];
 
   @ViewChild('trigger') trigger: ElementRef;
   @ContentChildren(MdOption) options: QueryList<MdOption>;
@@ -226,7 +240,7 @@ export class MdSelect implements AfterContentInit, ControlValueAccessor, OnDestr
 
   /** The animation state of the overlay panel. */
   _getPanelState(): string {
-    return this._isRtl() ? 'showing-rtl' : 'showing-ltr';
+    return this._isRtl() ? `${this._transformOrigin}-rtl` : `${this._transformOrigin}-ltr`;
   }
 
   /** Ensures the panel opens if activated by the keyboard. */
@@ -264,6 +278,14 @@ export class MdSelect implements AfterContentInit, ControlValueAccessor, OnDestr
     return this.disabled ? '-1' : '0';
   }
 
+  /**
+   * Sets the transform-origin property of the panel to ensure that it
+   * animates in the correct direction based on its positioning.
+   */
+  _updateTransformOrigin(pos: ConnectedOverlayPositionChange): void {
+    this._transformOrigin = pos.connectionPair.originY;
+  }
+
   /** Sets up a key manager to listen to keyboard events on the overlay panel. */
   private _initKeyManager() {
     this._keyManager = new ListKeyManager(this.options);
diff --git a/test/browser-providers.ts b/test/browser-providers.ts
index 9b5ec7bbc19c..61844bfdfac9 100644
--- a/test/browser-providers.ts
+++ b/test/browser-providers.ts
@@ -44,7 +44,7 @@ const configuration: { [name: string]: ConfigurationInfo } = {
   'Safari8':      { unitTest: {target: 'BS', required: false}, e2e: {target: null, required: true}},
   'Safari9':      { unitTest: {target: 'BS', required: false}, e2e: {target: null, required: true}},
   'iOS7':         { unitTest: {target: null, required: false}, e2e: {target: null, required: true}},
-  'iOS8':         { unitTest: {target: 'BS', required: true}, e2e: {target: null, required: true}},
+  'iOS8':         { unitTest: {target: null, required: false}, e2e: {target: null, required: true}},
   'iOS9':         { unitTest: {target: 'BS', required: true}, e2e: {target: null, required: true}},
   'WindowsPhone': { unitTest: {target: 'BS', required: false}, e2e: {target: null, required: true}}
 };