diff --git a/src/demo-app/select/select-demo.html b/src/demo-app/select/select-demo.html
index e48fdc5388bc..aae5985aae20 100644
--- a/src/demo-app/select/select-demo.html
+++ b/src/demo-app/select/select-demo.html
@@ -12,6 +12,7 @@
       <p> Status: {{ foodControl.status }} </p>
       <button md-button (click)="foodControl.setValue('pizza-1')">SET VALUE</button>
       <button md-button (click)="toggleDisabled()">TOGGLE DISABLED</button>
+      <button md-button (click)="foodControl.reset()">RESET</button>
     </md-card>
   </div>
 
@@ -30,6 +31,7 @@
     <button md-button (click)="currentDrink='sprite-1'">SET VALUE</button>
     <button md-button (click)="isRequired=!isRequired">TOGGLE REQUIRED</button>
     <button md-button (click)="isDisabled=!isDisabled">TOGGLE DISABLED</button>
+    <button md-button (click)="drinkControl.reset()">RESET</button>
   </md-card>
 
 </div>
diff --git a/src/lib/select/select.spec.ts b/src/lib/select/select.spec.ts
index d93404c6733e..cd973859983d 100644
--- a/src/lib/select/select.spec.ts
+++ b/src/lib/select/select.spec.ts
@@ -193,19 +193,19 @@ describe('MdSelect', () => {
     });
 
     it('should focus the selected option if an option is selected', async(() => {
-      trigger.click();
-      fixture.detectChanges();
-
-      const options =
-        overlayContainerElement.querySelectorAll('md-option') as NodeListOf<HTMLElement>;
-      options[1].click();
-      fixture.detectChanges();
+      // must wait for initial writeValue promise to finish
+      fixture.whenStable().then(() => {
+        fixture.componentInstance.control.setValue('pizza-1');
+        fixture.detectChanges();
 
-      trigger.click();
-      fixture.detectChanges();
+        trigger.click();
+        fixture.detectChanges();
 
-      fixture.whenStable().then(() => {
-        expect(fixture.componentInstance.select._keyManager.focusedItemIndex).toEqual(1);
+        // must wait for animation to finish
+        fixture.whenStable().then(() => {
+          fixture.detectChanges();
+          expect(fixture.componentInstance.select._keyManager.focusedItemIndex).toEqual(1);
+        });
       });
     }));
 
@@ -307,6 +307,49 @@ describe('MdSelect', () => {
         .toEqual('steak-0', `Expected control's value to be set to the new option.`);
     });
 
+    it('should clear the selection when a nonexistent option value is selected', () => {
+      fixture.componentInstance.control.setValue('pizza-1');
+      fixture.detectChanges();
+
+      fixture.componentInstance.control.setValue('gibberish');
+      fixture.detectChanges();
+
+      const value = fixture.debugElement.query(By.css('.md-select-value'));
+      expect(value).toBe(null, `Expected trigger to be cleared when option value is not found.`);
+      expect(trigger.textContent)
+          .not.toContain('Pizza', `Expected trigger to be cleared when option value is not found.`);
+
+      trigger.click();
+      fixture.detectChanges();
+
+      const options =
+          overlayContainerElement.querySelectorAll('md-option') as NodeListOf<HTMLElement>;
+      expect(options[1].classList)
+          .not.toContain('md-selected', `Expected option with the old value not to be selected.`);
+    });
+
+
+    it('should clear the selection when the control is reset', () => {
+      fixture.componentInstance.control.setValue('pizza-1');
+      fixture.detectChanges();
+
+      fixture.componentInstance.control.reset();
+      fixture.detectChanges();
+
+      const value = fixture.debugElement.query(By.css('.md-select-value'));
+      expect(value).toBe(null, `Expected trigger to be cleared when option value is not found.`);
+      expect(trigger.textContent)
+          .not.toContain('Pizza', `Expected trigger to be cleared when option value is not found.`);
+
+      trigger.click();
+      fixture.detectChanges();
+
+      const options =
+          overlayContainerElement.querySelectorAll('md-option') as NodeListOf<HTMLElement>;
+      expect(options[1].classList)
+          .not.toContain('md-selected', `Expected option with the old value not to be selected.`);
+    });
+
     it('should set the control to touched when the select is touched', () => {
       expect(fixture.componentInstance.control.touched)
         .toEqual(false, `Expected the control to start off as untouched.`);
diff --git a/src/lib/select/select.ts b/src/lib/select/select.ts
index e4b2eb936a4c..c5b0eaf2030d 100644
--- a/src/lib/select/select.ts
+++ b/src/lib/select/select.ts
@@ -277,11 +277,7 @@ export class MdSelect implements AfterContentInit, ControlValueAccessor, OnDestr
       return;
     }
 
-    this.options.forEach((option: MdOption) => {
-      if (option.value === value) {
-        option.select();
-      }
-    });
+    this._setSelectionByValue(value);
   }
 
   /**
@@ -378,6 +374,30 @@ export class MdSelect implements AfterContentInit, ControlValueAccessor, OnDestr
     scrollContainer.scrollTop = this._scrollTop;
   }
 
+  /**
+   * Sets the selected option based on a value. If no option can be
+   * found with the designated value, the select trigger is cleared.
+   */
+  private _setSelectionByValue(value: any): void {
+    const options = this.options.toArray();
+
+    for (let i = 0; i < this.options.length; i++) {
+      if (options[i].value === value) {
+        options[i].select();
+        return;
+      }
+    }
+
+    // Clear selection if no item was selected.
+    this._clearSelection();
+  }
+
+  /** Clears the select trigger and deselects every option in the list. */
+  private _clearSelection(): void {
+    this._selected = null;
+    this._updateOptions();
+  }
+
   private _getTriggerRect(): ClientRect {
     return this.trigger.nativeElement.getBoundingClientRect();
   }
@@ -426,6 +446,7 @@ export class MdSelect implements AfterContentInit, ControlValueAccessor, OnDestr
     this._selected = option;
     this._updateOptions();
     this._setValueWidth();
+    this._placeholderState = '';
     if (this.panelOpen) {
       this.close();
     }