diff --git a/src/components/autocomplete/autocomplete.spec.js b/src/components/autocomplete/autocomplete.spec.js
index cf72bf9aa82..c71bf1fbeb0 100644
--- a/src/components/autocomplete/autocomplete.spec.js
+++ b/src/components/autocomplete/autocomplete.spec.js
@@ -477,6 +477,75 @@ describe('<md-autocomplete>', function() {
       expect(ctrl2.hasNotFound).toBe(false);
     }));
 
+    it('should even show the md-not-found template if we have lost focus', inject(function($timeout) {
+      var scope = createScope();
+      var template =
+        '<md-autocomplete' +
+        '   md-selected-item="selectedItem"' +
+        '   md-search-text="searchText"' +
+        '   md-items="item in match(searchText)"' +
+        '   md-item-text="item.display"' +
+        '   placeholder="placeholder">' +
+        '  <md-item-template>{{item.display}}</md-item-template>' +
+        '  <md-not-found>Sorry, not found...</md-not-found>' +
+        '</md-autocomplete>';
+
+      var element = compile(template, scope);
+      var controller = element.controller('mdAutocomplete');
+
+      controller.focus();
+
+      scope.searchText = 'somethingthatdoesnotexist';
+
+      $timeout.flush();
+
+      controller.listEnter();
+      expect(controller.notFoundVisible()).toBe(true);
+
+      controller.blur();
+      expect(controller.notFoundVisible()).toBe(true);
+
+      controller.listLeave();
+      expect(controller.notFoundVisible()).toBe(false);
+
+      $timeout.flush();
+      element.remove();
+
+    }));
+
+    it('should not show the md-not-found template if we lost focus and left the list', inject(function($timeout) {
+      var scope = createScope();
+      var template =
+        '<md-autocomplete' +
+        '   md-selected-item="selectedItem"' +
+        '   md-search-text="searchText"' +
+        '   md-items="item in match(searchText)"' +
+        '   md-item-text="item.display"' +
+        '   placeholder="placeholder">' +
+        '  <md-item-template>{{item.display}}</md-item-template>' +
+        '  <md-not-found>Sorry, not found...</md-not-found>' +
+        '</md-autocomplete>';
+
+      var element = compile(template, scope);
+      var controller = element.controller('mdAutocomplete');
+
+      controller.focus();
+
+      scope.searchText = 'somethingthatdoesnotexist';
+
+      $timeout.flush();
+
+      controller.listEnter();
+      expect(controller.notFoundVisible()).toBe(true);
+
+      controller.listLeave();
+      controller.blur();
+      expect(controller.notFoundVisible()).toBe(false);
+
+      $timeout.flush();
+      element.remove();
+    }));
+
   });
 
   describe('xss prevention', function() {
diff --git a/src/components/autocomplete/js/autocompleteController.js b/src/components/autocomplete/js/autocompleteController.js
index e82d092b780..dd3b51df95d 100644
--- a/src/components/autocomplete/js/autocompleteController.js
+++ b/src/components/autocomplete/js/autocompleteController.js
@@ -18,7 +18,8 @@ function MdAutocompleteCtrl ($scope, $element, $mdUtil, $mdConstant, $mdTheming,
       noBlur               = false,
       selectedItemWatchers = [],
       hasFocus             = false,
-      lastCount            = 0;
+      lastCount            = 0,
+      promiseFetch         = false;
 
   //-- public variables with handlers
   defineProperty('hidden', handleHiddenChange, true);
@@ -638,11 +639,13 @@ function MdAutocompleteCtrl ($scope, $element, $mdUtil, $mdConstant, $mdTheming,
       handleResults(items);
     } else if (items) {
       setLoading(true);
+      promiseFetch = true;
       $mdUtil.nextTick(function () {
         if (items.success) items.success(handleResults);
         if (items.then)    items.then(handleResults);
         if (items.finally) items.finally(function () {
           setLoading(false);
+          promiseFetch = false;
         });
       },true, $scope);
     }
@@ -707,7 +710,7 @@ function MdAutocompleteCtrl ($scope, $element, $mdUtil, $mdConstant, $mdTheming,
   function notFoundVisible () {
     var textLength = (ctrl.scope.searchText || '').length;
 
-    return ctrl.hasNotFound && !hasMatches() && !ctrl.loading && textLength >= getMinLength() && hasFocus && !hasSelection();
+    return ctrl.hasNotFound && !hasMatches() && (!ctrl.loading || promiseFetch) && textLength >= getMinLength() && (hasFocus || noBlur) && !hasSelection();
   }
 
   /**