diff --git a/e2e/components/list/list.e2e.ts b/e2e/components/list/list.e2e.ts
index 708ff9943ef0..6133737ad21e 100644
--- a/e2e/components/list/list.e2e.ts
+++ b/e2e/components/list/list.e2e.ts
@@ -9,4 +9,38 @@ describe('list', () => {
     let container = element(by.css('md-list'));
     expect(container.isElementPresent(by.css('md-list-item'))).toBe(true);
   });
+
+  it('should be tabbable', () => {
+    pressKey(protractor.Key.TAB);
+    expectFocusOn(element(by.css('md-list')));
+  });
+
+  it('should shift focus between the list items', () => {
+    let items = element.all(by.css('md-list-item'));
+
+    pressKey(protractor.Key.TAB);
+    pressKey(protractor.Key.DOWN);
+    expectFocusOn(items.get(0));
+
+    pressKey(protractor.Key.DOWN);
+    expectFocusOn(items.get(1));
+
+    pressKey(protractor.Key.DOWN);
+    expectFocusOn(items.get(2));
+
+    pressKey(protractor.Key.UP);
+    expectFocusOn(items.get(1));
+
+    pressKey(protractor.Key.UP);
+    expectFocusOn(items.get(0));
+  });
+
+  // TODO: move to utility file. this was taken from the menu-page.ts
+  function expectFocusOn(el: any): void {
+    expect(browser.driver.switchTo().activeElement().getInnerHtml()).toBe(el.getInnerHtml());
+  }
+
+  function pressKey(key: string) {
+    browser.actions().sendKeys(key).perform();
+  }
 });
diff --git a/src/e2e-app/list/list-e2e.html b/src/e2e-app/list/list-e2e.html
index 676a29d5dd92..12ff3ccdd5ca 100644
--- a/src/e2e-app/list/list-e2e.html
+++ b/src/e2e-app/list/list-e2e.html
@@ -2,4 +2,5 @@
   <h3 md-subheader>Items</h3>
   <md-list-item>Item one</md-list-item>
   <md-list-item>Item two</md-list-item>
+  <md-list-item>Item three</md-list-item>
 </md-list>
diff --git a/src/lib/list/index.ts b/src/lib/list/index.ts
index 71825137f468..4e413160dd25 100644
--- a/src/lib/list/index.ts
+++ b/src/lib/list/index.ts
@@ -1 +1,20 @@
-export * from './list';
+import {NgModule, ModuleWithProviders} from '@angular/core';
+import {MdLineModule} from '../core';
+import {MdList} from './list';
+import {MdListItem} from './list-item';
+import {MdListDivider, MdListAvatar} from './list-directives';
+
+
+@NgModule({
+  imports: [MdLineModule],
+  exports: [MdList, MdListItem, MdListDivider, MdListAvatar, MdLineModule],
+  declarations: [MdList, MdListItem, MdListDivider, MdListAvatar],
+})
+export class MdListModule {
+  static forRoot(): ModuleWithProviders {
+    return {
+      ngModule: MdListModule,
+      providers: []
+    };
+  }
+}
diff --git a/src/lib/list/list-directives.ts b/src/lib/list/list-directives.ts
new file mode 100644
index 000000000000..0749995f3138
--- /dev/null
+++ b/src/lib/list/list-directives.ts
@@ -0,0 +1,9 @@
+import {Directive} from '@angular/core';
+
+
+@Directive({ selector: 'md-divider' })
+export class MdListDivider { }
+
+/* Need directive for a ContentChild query in list-item */
+@Directive({ selector: '[md-list-avatar]' })
+export class MdListAvatar { }
diff --git a/src/lib/list/list-item.ts b/src/lib/list/list-item.ts
new file mode 100644
index 000000000000..0501b36f14a2
--- /dev/null
+++ b/src/lib/list/list-item.ts
@@ -0,0 +1,58 @@
+import {
+    Component,
+    ViewEncapsulation,
+    ContentChildren,
+    ContentChild,
+    QueryList,
+    ElementRef,
+    Renderer,
+    AfterContentInit,
+} from '@angular/core';
+import {MdLine, MdLineSetter} from '../core';
+import {MdListAvatar} from './list-directives';
+import {MdFocusable} from '../core/a11y/list-key-manager';
+
+
+@Component({
+  moduleId: module.id,
+  selector: 'md-list-item, a[md-list-item]',
+  host: {
+    'role': 'listitem',
+    '(focus)': '_handleFocus()',
+    '(blur)': '_handleBlur()',
+    'tabIndex': '-1'
+  },
+  templateUrl: 'list-item.html',
+  encapsulation: ViewEncapsulation.None
+})
+export class MdListItem implements AfterContentInit, MdFocusable {
+  _hasFocus: boolean = false;
+
+  private _lineSetter: MdLineSetter;
+
+  @ContentChildren(MdLine) _lines: QueryList<MdLine>;
+
+  @ContentChild(MdListAvatar)
+  set _hasAvatar(avatar: MdListAvatar) {
+    this._renderer.setElementClass(this._element.nativeElement, 'md-list-avatar', avatar != null);
+  }
+
+  constructor(private _renderer: Renderer, private _element: ElementRef) { }
+
+  /** TODO: internal */
+  ngAfterContentInit() {
+    this._lineSetter = new MdLineSetter(this._lines, this._renderer, this._element);
+  }
+
+  _handleFocus() {
+    this._hasFocus = true;
+  }
+
+  _handleBlur() {
+    this._hasFocus = false;
+  }
+
+  focus() {
+    this._renderer.invokeElementMethod(this._element.nativeElement, 'focus');
+  }
+}
diff --git a/src/lib/list/list.scss b/src/lib/list/list.scss
index 064c7e6dd6af..dcde4a9643f7 100644
--- a/src/lib/list/list.scss
+++ b/src/lib/list/list.scss
@@ -106,6 +106,7 @@ $md-dense-three-line-height: 76px;
 md-list, md-nav-list {
   padding-top: $md-list-top-padding;
   display: block;
+  outline: 0;
 
   [md-subheader] {
     @include md-subheader-base(
diff --git a/src/lib/list/list.spec.ts b/src/lib/list/list.spec.ts
index d8ebef1c604b..f4a41e1ccb45 100644
--- a/src/lib/list/list.spec.ts
+++ b/src/lib/list/list.spec.ts
@@ -1,7 +1,8 @@
 import {async, TestBed} from '@angular/core/testing';
 import {Component} from '@angular/core';
 import {By} from '@angular/platform-browser';
-import {MdListItem, MdListModule} from './list';
+import {MdListModule} from './index';
+import {MdListItem} from './list-item';
 
 
 describe('MdList', () => {
@@ -19,6 +20,7 @@ describe('MdList', () => {
         ListWithDynamicNumberOfLines,
         ListWithMultipleItems,
         ListWithManyLines,
+        ListWithTabIndex,
       ],
     });
 
@@ -114,6 +116,15 @@ describe('MdList', () => {
     expect(list.nativeElement.getAttribute('role')).toBe('list');
     expect(listItem.nativeElement.getAttribute('role')).toBe('listitem');
   });
+
+  it('should forward the tabindex to the list element', () => {
+    let fixture = TestBed.createComponent(ListWithTabIndex);
+    let list = fixture.debugElement.children[0].nativeElement;
+
+    fixture.detectChanges();
+
+    expect(list.getAttribute('tabindex')).toBe('1');
+  });
 });
 
 
@@ -211,3 +222,11 @@ class ListWithDynamicNumberOfLines extends BaseTestList { }
     </md-list-item>
   </md-list>`})
 class ListWithMultipleItems extends BaseTestList { }
+
+@Component({template: `
+  <md-list tabindex="1">
+    <md-list-item>
+      Paprika
+    </md-list-item>
+  </md-list>`})
+class ListWithTabIndex extends BaseTestList { }
diff --git a/src/lib/list/list.ts b/src/lib/list/list.ts
index 755b40ed0721..0faab15afcbf 100644
--- a/src/lib/list/list.ts
+++ b/src/lib/list/list.ts
@@ -2,86 +2,49 @@ import {
     Component,
     ViewEncapsulation,
     ContentChildren,
-    ContentChild,
     QueryList,
-    Directive,
     ElementRef,
-    Renderer,
     AfterContentInit,
-    NgModule,
-    ModuleWithProviders,
+    Input,
 } from '@angular/core';
-import {MdLine, MdLineSetter, MdLineModule} from '../core';
+import {ListKeyManager} from '../core/a11y/list-key-manager';
+import {DOWN_ARROW} from '../core/keyboard/keycodes';
+import {MdListItem} from './list-item';
 
-@Directive({
-  selector: 'md-divider'
-})
-export class MdListDivider {}
 
 @Component({
   moduleId: module.id,
   selector: 'md-list, md-nav-list',
-  host: {'role': 'list'},
-  template: '<ng-content></ng-content>',
-  styleUrls: ['list.css'],
-  encapsulation: ViewEncapsulation.None
-})
-export class MdList {}
-
-/* Need directive for a ContentChild query in list-item */
-@Directive({ selector: '[md-list-avatar]' })
-export class MdListAvatar {}
-
-@Component({
-  moduleId: module.id,
-  selector: 'md-list-item, a[md-list-item]',
   host: {
-    'role': 'listitem',
-    '(focus)': '_handleFocus()',
-    '(blur)': '_handleBlur()',
+    'role': 'list',
+    '[attr.tabIndex]': 'tabindex',
+    '(keydown)': '_handleKeydown($event)'
   },
-  templateUrl: 'list-item.html',
+  template: '<ng-content></ng-content>',
+  styleUrls: ['list.css'],
   encapsulation: ViewEncapsulation.None
 })
-export class MdListItem implements AfterContentInit {
-  _hasFocus: boolean = false;
+export class MdList implements AfterContentInit {
+  @ContentChildren(MdListItem) _items: QueryList<MdListItem>;
+  @Input() tabindex: number = 0;
 
-  private _lineSetter: MdLineSetter;
+  /** Manages the keyboard events between list items. */
+  private _keyManager: ListKeyManager;
 
-  @ContentChildren(MdLine) _lines: QueryList<MdLine>;
+  constructor(private _elementRef: ElementRef) { }
 
-  @ContentChild(MdListAvatar)
-  set _hasAvatar(avatar: MdListAvatar) {
-    this._renderer.setElementClass(this._element.nativeElement, 'md-list-avatar', avatar != null);
-  }
-
-  constructor(private _renderer: Renderer, private _element: ElementRef) {}
-
-  /** TODO: internal */
   ngAfterContentInit() {
-    this._lineSetter = new MdLineSetter(this._lines, this._renderer, this._element);
-  }
-
-  _handleFocus() {
-    this._hasFocus = true;
+    this._keyManager = new ListKeyManager(this._items);
   }
 
-  _handleBlur() {
-    this._hasFocus = false;
-  }
-}
-
-
-@NgModule({
-  imports: [MdLineModule],
-  exports: [MdList, MdListItem, MdListDivider, MdListAvatar, MdLineModule],
-  declarations: [MdList, MdListItem, MdListDivider, MdListAvatar],
-})
-export class MdListModule {
-  static forRoot(): ModuleWithProviders {
-    return {
-      ngModule: MdListModule,
-      providers: []
-    };
+  /**
+   * Shifts focus to the appropriate list item.
+   */
+  _handleKeydown(event: KeyboardEvent) {
+    if (event.target === this._elementRef.nativeElement && event.keyCode === DOWN_ARROW) {
+      this._keyManager.focusFirstItem();
+    } else {
+      this._keyManager.onKeydown(event);
+    }
   }
 }