diff --git a/src/lib/select/select.spec.ts b/src/lib/select/select.spec.ts
index be4159cd5c84..7587ff7b0880 100644
--- a/src/lib/select/select.spec.ts
+++ b/src/lib/select/select.spec.ts
@@ -4015,6 +4015,84 @@ describe('MatSelect', () => {
     });
 
   });
+
+  describe('value propagation when options are added/removed', () => {
+    let fixture: ComponentFixture<BasicSelectWithoutFormsMultiple>;
+    let testComponent: BasicSelectWithoutFormsMultiple;
+
+    beforeEach(fakeAsync(() => {
+      configureMatSelectTestingModule([BasicSelectWithoutFormsMultiple]);
+      fixture = TestBed.createComponent(BasicSelectWithoutFormsMultiple);
+      testComponent = fixture.componentInstance;
+      fixture.detectChanges();
+    }));
+
+    it('should propagate the changes when a selected option is removed', fakeAsync(() => {
+      testComponent.selectedFoods = ['steak-0', 'pizza-1'];
+      fixture.detectChanges();
+      flush();
+
+      expect(testComponent.select.value).toEqual(['steak-0', 'pizza-1']);
+      testComponent.selectionChange.calls.reset();
+
+      testComponent.foods.shift();
+      fixture.detectChanges();
+      flush();
+
+      expect(testComponent.selectionChange).toHaveBeenCalledTimes(1);
+      expect(testComponent.select.value).toEqual(['pizza-1']);
+      expect(testComponent.selectedFoods).toEqual(['pizza-1']);
+    }));
+
+    it('should propagate the changes when a selected option is added', fakeAsync(() => {
+      testComponent.selectedFoods = ['steak-0'];
+      fixture.detectChanges();
+      flush();
+
+      expect(testComponent.select.value).toEqual(['steak-0']);
+      testComponent.selectionChange.calls.reset();
+
+      testComponent.foods.push({value: 'pasta-4', viewValue: 'Pasta'});
+      testComponent.selectedFoods.push('pasta-4');
+      fixture.detectChanges();
+      flush();
+
+      expect(testComponent.selectionChange).toHaveBeenCalledTimes(1);
+      expect(testComponent.select.value).toEqual(['steak-0', 'pasta-4']);
+      expect(testComponent.selectedFoods).toEqual(['steak-0', 'pasta-4']);
+    }));
+
+    it('should not propagate changes when a non-selected option is removed', fakeAsync(() => {
+      testComponent.selectedFoods = ['steak-0'];
+      fixture.detectChanges();
+      flush();
+
+      testComponent.selectionChange.calls.reset();
+      testComponent.foods.pop();
+      fixture.detectChanges();
+      flush();
+
+      expect(testComponent.selectionChange).not.toHaveBeenCalled();
+      expect(testComponent.select.value).toEqual(['steak-0']);
+      expect(testComponent.selectedFoods).toEqual(['steak-0']);
+    }));
+
+    it('should not propagate changes when a non-selected option is added', fakeAsync(() => {
+      testComponent.selectedFoods = ['steak-0'];
+      fixture.detectChanges();
+      flush();
+
+      testComponent.selectionChange.calls.reset();
+      testComponent.foods.push({value: 'pasta-4', viewValue: 'Pasta'});
+      fixture.detectChanges();
+      flush();
+
+      expect(testComponent.selectionChange).not.toHaveBeenCalled();
+      expect(testComponent.select.value).toEqual(['steak-0']);
+      expect(testComponent.selectedFoods).toEqual(['steak-0']);
+    }));
+
+  });
 });
 
 
@@ -4601,7 +4679,8 @@ class BasicSelectWithoutFormsPreselected {
 @Component({
   template: `
     <mat-form-field>
-      <mat-select placeholder="Food" [(value)]="selectedFoods" multiple>
+      <mat-select multiple placeholder="Food" [(value)]="selectedFoods"
+        (selectionChange)="selectionChange()">
         <mat-option *ngFor="let food of foods" [value]="food.value">
           {{ food.viewValue }}
         </mat-option>
@@ -4611,6 +4690,7 @@ class BasicSelectWithoutFormsPreselected {
 })
 class BasicSelectWithoutFormsMultiple {
   selectedFoods: string[];
+  selectionChange = jasmine.createSpy('selectionChange spy');
   foods: any[] = [
     { value: 'steak-0', viewValue: 'Steak' },
     { value: 'pizza-1', viewValue: 'Pizza' },
diff --git a/src/lib/select/select.ts b/src/lib/select/select.ts
index cd11b499f569..33964a193e97 100644
--- a/src/lib/select/select.ts
+++ b/src/lib/select/select.ts
@@ -519,9 +519,9 @@ export class MatSelect extends _MatSelectMixinBase implements AfterContentInit,
       event.removed.forEach(option => option.deselect());
     });
 
-    this.options.changes.pipe(startWith(null), takeUntil(this._destroy)).subscribe(() => {
+    this.options.changes.pipe(startWith(null), takeUntil(this._destroy)).subscribe(options => {
       this._resetOptions();
-      this._initializeSelection();
+      options ? this._handleSelectionChange() : this._initializeSelection();
     });
   }
 
@@ -781,6 +781,29 @@ export class MatSelect extends _MatSelectMixinBase implements AfterContentInit,
     });
   }
 
+  /**
+   * Handles changes in the amount of options. Sets the `selected` status of any newly-added
+   * options and propagates the changes back up, if any of the selected options were removed
+   * or any selected options were added.
+   */
+  private _handleSelectionChange(): void {
+    Promise.resolve().then(() => {
+      // Save the currently-selected options for reference.
+      const previousSelection = this._selectionModel.selected;
+
+      // Update the selected options.
+      this._setSelectionByValue(this.ngControl ? this.ngControl.value : this._value);
+
+      const currentSelection = this._selectionModel.selected;
+
+      // Check if the selection has changed and propagate the changes to the model.
+      if (previousSelection.length !== currentSelection.length ||
+          currentSelection.find(option => previousSelection.indexOf(option) === -1)) {
+        this._propagateChanges();
+      }
+    });
+  }
+
   /**
    * Sets the selected option based on a value. If no option can be
    * found with the designated value, the select trigger is cleared.