diff --git a/src/lib/autocomplete/autocomplete-trigger.ts b/src/lib/autocomplete/autocomplete-trigger.ts
index 6ce9c1040cc8..38349d1dc92a 100644
--- a/src/lib/autocomplete/autocomplete-trigger.ts
+++ b/src/lib/autocomplete/autocomplete-trigger.ts
@@ -198,23 +198,22 @@ export class MdAutocompleteTrigger implements ControlValueAccessor, OnDestroy {
 
   /** Closes the autocomplete suggestion panel. */
   closePanel(): void {
-    if (!this.panelOpen) {
-      return;
-    }
-
     if (this._overlayRef && this._overlayRef.hasAttached()) {
       this._overlayRef.detach();
       this._closingActionsSubscription.unsubscribe();
     }
 
-    this._panelOpen = false;
     this._resetPlaceholder();
 
-    // We need to trigger change detection manually, because
-    // `fromEvent` doesn't seem to do it at the proper time.
-    // This ensures that the placeholder is reset when the
-    // user clicks outside.
-    this._changeDetectorRef.detectChanges();
+    if (this._panelOpen) {
+      this._panelOpen = false;
+
+      // We need to trigger change detection manually, because
+      // `fromEvent` doesn't seem to do it at the proper time.
+      // This ensures that the placeholder is reset when the
+      // user clicks outside.
+      this._changeDetectorRef.detectChanges();
+    }
   }
 
   /**
diff --git a/src/lib/autocomplete/autocomplete.spec.ts b/src/lib/autocomplete/autocomplete.spec.ts
index de12a3fb799a..425aa491e003 100644
--- a/src/lib/autocomplete/autocomplete.spec.ts
+++ b/src/lib/autocomplete/autocomplete.spec.ts
@@ -344,6 +344,37 @@ describe('MdAutocomplete', () => {
       });
     }));
 
+    it('should toggle the visibility when typing and closing the panel', fakeAsync(() => {
+      fixture.componentInstance.trigger.openPanel();
+      tick();
+      fixture.detectChanges();
+
+      expect(overlayContainerElement.querySelector('.mat-autocomplete-panel')!.classList)
+          .toContain('mat-autocomplete-visible', 'Expected panel to be visible.');
+
+      typeInElement('x', input);
+      fixture.detectChanges();
+      tick();
+      fixture.detectChanges();
+
+      expect(overlayContainerElement.querySelector('.mat-autocomplete-panel')!.classList)
+          .toContain('mat-autocomplete-hidden', 'Expected panel to be hidden.');
+
+      fixture.componentInstance.trigger.closePanel();
+      fixture.detectChanges();
+
+      fixture.componentInstance.trigger.openPanel();
+      fixture.detectChanges();
+
+      typeInElement('al', input);
+      fixture.detectChanges();
+      tick();
+      fixture.detectChanges();
+
+      expect(overlayContainerElement.querySelector('.mat-autocomplete-panel')!.classList)
+          .toContain('mat-autocomplete-visible', 'Expected panel to be visible.');
+    }));
+
   });
 
   it('should have the correct text direction in RTL', () => {