diff --git a/docs/src/pages/components/autocomplete/Virtualize.js b/docs/src/pages/components/autocomplete/Virtualize.js
index 42e36e3e999cf3..8a46534e5b4079 100644
--- a/docs/src/pages/components/autocomplete/Virtualize.js
+++ b/docs/src/pages/components/autocomplete/Virtualize.js
@@ -3,50 +3,71 @@ import PropTypes from 'prop-types';
 import TextField from '@material-ui/core/TextField';
 import Autocomplete from '@material-ui/lab/Autocomplete';
 import useMediaQuery from '@material-ui/core/useMediaQuery';
+import ListSubheader from '@material-ui/core/ListSubheader';
 import { useTheme, makeStyles } from '@material-ui/core/styles';
-import { FixedSizeList } from 'react-window';
+import { VariableSizeList } from 'react-window';
+import { Typography } from '@material-ui/core';
+
+const LISTBOX_PADDING = 8; // px
 
 function renderRow(props) {
   const { data, index, style } = props;
-
   return React.cloneElement(data[index], {
     style: {
-      overflow: 'hidden',
-      textOverflow: 'ellipsis',
-      whiteSpace: 'nowrap',
-      display: 'block',
       ...style,
+      top: style.top + LISTBOX_PADDING,
     },
   });
 }
 
+const OuterElementContext = React.createContext({});
+
+const OuterElementType = React.forwardRef((props, ref) => {
+  const outerProps = React.useContext(OuterElementContext);
+  return <div ref={ref} {...props} {...outerProps} />;
+});
+
 // Adapter for react-window
 const ListboxComponent = React.forwardRef(function ListboxComponent(props, ref) {
   const { children, ...other } = props;
+  const itemData = React.Children.toArray(children);
   const theme = useTheme();
-  const smUp = useMediaQuery(theme.breakpoints.up('sm'));
-  const itemCount = Array.isArray(children) ? children.length : 0;
+  const smUp = useMediaQuery(theme.breakpoints.up('sm'), { noSsr: true });
+  const itemCount = itemData.length;
   const itemSize = smUp ? 36 : 48;
 
-  const outerElementType = React.useMemo(() => {
-    return React.forwardRef((props2, ref2) => <div ref={ref2} {...props2} {...other} />);
-  }, []); // eslint-disable-line react-hooks/exhaustive-deps
+  const getChildSize = child => {
+    if (React.isValidElement(child) && child.type === ListSubheader) {
+      return 48;
+    }
+
+    return itemSize;
+  };
+
+  const getHeight = () => {
+    if (itemCount > 8) {
+      return 8 * itemSize;
+    }
+    return itemData.map(getChildSize).reduce((a, b) => a + b, 0);
+  };
 
   return (
     <div ref={ref}>
-      <FixedSizeList
-        style={{ padding: 0, height: Math.min(8, itemCount) * itemSize, maxHeight: 'auto' }}
-        itemData={children}
-        height={250}
-        width="100%"
-        outerElementType={outerElementType}
-        innerElementType="ul"
-        itemSize={itemSize}
-        overscanCount={5}
-        itemCount={itemCount}
-      >
-        {renderRow}
-      </FixedSizeList>
+      <OuterElementContext.Provider value={other}>
+        <VariableSizeList
+          itemData={itemData}
+          height={getHeight() + 2 * LISTBOX_PADDING}
+          width="100%"
+          key={itemCount}
+          outerElementType={OuterElementType}
+          innerElementType="ul"
+          itemSize={index => getChildSize(itemData[index])}
+          overscanCount={5}
+          itemCount={itemCount}
+        >
+          {renderRow}
+        </VariableSizeList>
+      </OuterElementContext.Provider>
     </div>
   );
 });
@@ -75,6 +96,17 @@ const useStyles = makeStyles({
   },
 });
 
+const OPTIONS = Array.from(new Array(10000))
+  .map(() => random(10 + Math.ceil(Math.random() * 20)))
+  .sort((a, b) => a.toUpperCase().localeCompare(b.toUpperCase()));
+
+const renderGroup = params => [
+  <ListSubheader key={params.key} component="div">
+    {params.key}
+  </ListSubheader>,
+  params.children,
+];
+
 export default function Virtualize() {
   const classes = useStyles();
 
@@ -85,10 +117,13 @@ export default function Virtualize() {
       disableListWrap
       classes={classes}
       ListboxComponent={ListboxComponent}
-      options={Array.from(new Array(10000)).map(() => random(Math.ceil(Math.random() * 18)))}
+      renderGroup={renderGroup}
+      options={OPTIONS}
+      groupBy={option => option[0].toUpperCase()}
       renderInput={params => (
         <TextField {...params} variant="outlined" label="10,000 options" fullWidth />
       )}
+      renderOption={option => <Typography noWrap>{option}</Typography>}
     />
   );
 }
diff --git a/docs/src/pages/components/autocomplete/Virtualize.tsx b/docs/src/pages/components/autocomplete/Virtualize.tsx
index b676d3849a5adc..17cd5e086d46a8 100644
--- a/docs/src/pages/components/autocomplete/Virtualize.tsx
+++ b/docs/src/pages/components/autocomplete/Virtualize.tsx
@@ -1,58 +1,75 @@
 import React from 'react';
 import TextField from '@material-ui/core/TextField';
-import Autocomplete from '@material-ui/lab/Autocomplete';
+import Autocomplete, { RenderGroupParams } from '@material-ui/lab/Autocomplete';
 import useMediaQuery from '@material-ui/core/useMediaQuery';
+import ListSubheader from '@material-ui/core/ListSubheader';
 import { useTheme, makeStyles } from '@material-ui/core/styles';
-import { FixedSizeList, ListChildComponentProps } from 'react-window';
+import { VariableSizeList, ListChildComponentProps } from 'react-window';
+import { Typography } from '@material-ui/core';
+
+const LISTBOX_PADDING = 8; // px
 
 function renderRow(props: ListChildComponentProps) {
   const { data, index, style } = props;
-
   return React.cloneElement(data[index], {
     style: {
-      overflow: 'hidden',
-      textOverflow: 'ellipsis',
-      whiteSpace: 'nowrap',
-      display: 'block',
       ...style,
+      top: (style.top as number) + LISTBOX_PADDING,
     },
   });
 }
 
+const OuterElementContext = React.createContext({});
+
+const OuterElementType = React.forwardRef<HTMLDivElement>((props, ref) => {
+  const outerProps = React.useContext(OuterElementContext);
+  return <div ref={ref} {...props} {...outerProps} />;
+});
+
 // Adapter for react-window
-const ListboxComponent = React.forwardRef<HTMLDivElement, React.HTMLAttributes<HTMLElement>>(
-  function ListboxComponent(props, ref) {
-    const { children, ...other } = props;
-    const theme = useTheme();
-    const smUp = useMediaQuery(theme.breakpoints.up('sm'));
-    const itemCount = Array.isArray(children) ? children.length : 0;
-    const itemSize = smUp ? 36 : 48;
-
-    const outerElementType = React.useMemo(() => {
-      return React.forwardRef<HTMLDivElement, React.HTMLAttributes<HTMLDivElement>>(
-        (props2, ref2) => <div ref={ref2} {...props2} {...other} />,
-      );
-    }, []); // eslint-disable-line react-hooks/exhaustive-deps
-
-    return (
-      <div ref={ref}>
-        <FixedSizeList
-          style={{ padding: 0, height: Math.min(8, itemCount) * itemSize, maxHeight: 'auto' }}
-          itemData={children}
-          height={250}
+const ListboxComponent = React.forwardRef<HTMLDivElement>(function ListboxComponent(props, ref) {
+  const { children, ...other } = props;
+  const itemData = React.Children.toArray(children);
+  const theme = useTheme();
+  const smUp = useMediaQuery(theme.breakpoints.up('sm'), { noSsr: true });
+  const itemCount = itemData.length;
+  const itemSize = smUp ? 36 : 48;
+
+  const getChildSize = (child: React.ReactNode) => {
+    if (React.isValidElement(child) && child.type === ListSubheader) {
+      return 48;
+    }
+
+    return itemSize;
+  };
+
+  const getHeight = () => {
+    if (itemCount > 8) {
+      return 8 * itemSize;
+    }
+    return itemData.map(getChildSize).reduce((a, b) => a + b, 0);
+  };
+
+  return (
+    <div ref={ref}>
+      <OuterElementContext.Provider value={other}>
+        <VariableSizeList
+          itemData={itemData}
+          height={getHeight() + 2 * LISTBOX_PADDING}
           width="100%"
-          outerElementType={outerElementType}
+          key={itemCount}
+          outerElementType={OuterElementType}
           innerElementType="ul"
-          itemSize={itemSize}
+          itemSize={index => getChildSize(itemData[index])}
           overscanCount={5}
           itemCount={itemCount}
         >
           {renderRow}
-        </FixedSizeList>
-      </div>
-    );
-  },
-);
+        </VariableSizeList>
+      </OuterElementContext.Provider>
+    </div>
+  );
+});
 
 function random(length: number) {
   const characters = 'ABCDEFGHIJKLMNOPQRSTUVWXYZabcdefghijklmnopqrstuvwxyz0123456789';
@@ -74,6 +91,17 @@ const useStyles = makeStyles({
   },
 });
 
+const OPTIONS = Array.from(new Array(10000))
+  .map(() => random(10 + Math.ceil(Math.random() * 20)))
+  .sort((a: string, b: string) => a.toUpperCase().localeCompare(b.toUpperCase()));
+
+const renderGroup = (params: RenderGroupParams) => [
+  <ListSubheader key={params.key} component="div">
+    {params.key}
+  </ListSubheader>,
+  params.children,
+];
+
 export default function Virtualize() {
   const classes = useStyles();
 
@@ -83,11 +111,14 @@ export default function Virtualize() {
       style={{ width: 300 }}
       disableListWrap
       classes={classes}
-      ListboxComponent={ListboxComponent}
-      options={Array.from(new Array(10000)).map(() => random(Math.ceil(Math.random() * 18)))}
+      ListboxComponent={ListboxComponent as React.ComponentType<React.HTMLAttributes<HTMLElement>>}
+      renderGroup={renderGroup}
+      options={OPTIONS}
+      groupBy={option => option[0].toUpperCase()}
       renderInput={params => (
         <TextField {...params} variant="outlined" label="10,000 options" fullWidth />
       )}
+      renderOption={option => <Typography noWrap>{option}</Typography>}
     />
   );
 }