diff --git a/src/demo-app/input/input-container-demo.html b/src/demo-app/input/input-container-demo.html
index d393a5b6459e..d73c0cbb0aa6 100644
--- a/src/demo-app/input/input-container-demo.html
+++ b/src/demo-app/input/input-container-demo.html
@@ -180,9 +180,16 @@ <h4>Textarea</h4>
       </md-input-container>
     </p>
     <p>
-      <md-checkbox [(ngModel)]="floatingLabel"> Check to make floating label:</md-checkbox>
-      <md-input-container [floatingPlaceholder]="floatingLabel">
-        <input mdInput [placeholder]="floatingLabel ? 'Floating label' : 'Not floating label'">
+      <md-button-toggle-group [(ngModel)]="floatingLabel">
+        <md-button-toggle value="auto">Auto Float</md-button-toggle>
+        <md-button-toggle value="always">Always Float</md-button-toggle>
+        <md-button-toggle value="never">Never Float</md-button-toggle>
+      </md-button-toggle-group>
+    </p>
+
+    <p>
+      <md-input-container [floatPlaceholder]="floatingLabel">
+        <input mdInput placeholder="Placeholder">
       </md-input-container>
     </p>
 
diff --git a/src/demo-app/input/input-container-demo.ts b/src/demo-app/input/input-container-demo.ts
index 38edcda046a2..9c773f00e5ee 100644
--- a/src/demo-app/input/input-container-demo.ts
+++ b/src/demo-app/input/input-container-demo.ts
@@ -11,9 +11,9 @@ let max = 5;
   styleUrls: ['input-container-demo.css'],
 })
 export class InputContainerDemo {
+  floatingLabel: string = 'auto';
   dividerColor: boolean;
   requiredField: boolean;
-  floatingLabel: boolean;
   ctrlDisabled = false;
 
   name: string;
diff --git a/src/lib/input/input-container.html b/src/lib/input/input-container.html
index 50b76067a9c2..c457a7d8173c 100644
--- a/src/lib/input/input-container.html
+++ b/src/lib/input/input-container.html
@@ -7,9 +7,9 @@
 
       <label class="md-input-placeholder"
              [attr.for]="_mdInputChild.id"
-             [class.md-empty]="_mdInputChild.empty"
+             [class.md-empty]="_mdInputChild.empty && !_shouldAlwaysFloat"
              [class.md-focused]="_mdInputChild.focused"
-             [class.md-float]="floatingPlaceholder"
+             [class.md-float]="_canPlaceholderFloat"
              [class.md-accent]="dividerColor == 'accent'"
              [class.md-warn]="dividerColor == 'warn'"
              *ngIf="_hasPlaceholder()">
diff --git a/src/lib/input/input-container.spec.ts b/src/lib/input/input-container.spec.ts
index 317a290a1793..953c7e57c353 100644
--- a/src/lib/input/input-container.spec.ts
+++ b/src/lib/input/input-container.spec.ts
@@ -48,7 +48,8 @@ describe('MdInputContainer', function () {
         MdInputContainerWithStaticPlaceholder,
         MdInputContainerMissingMdInputTestController,
         MdInputContainerMultipleHintTestController,
-        MdInputContainerMultipleHintMixedTestController
+        MdInputContainerMultipleHintMixedTestController,
+        MdInputContainerWithDynamicPlaceholder
       ],
     });
 
@@ -61,8 +62,8 @@ describe('MdInputContainer', function () {
 
     let inputContainer = fixture.debugElement.query(By.directive(MdInputContainer))
         .componentInstance as MdInputContainer;
-    expect(inputContainer.floatingPlaceholder).toBe(true,
-        'Expected MdInputContainer to default to having floating placeholders turned on');
+    expect(inputContainer.floatPlaceholder).toBe('auto',
+        'Expected MdInputContainer to set floatingLabel to auto by default.');
   });
 
   it('should not be treated as empty if type is date',
@@ -477,6 +478,78 @@ describe('MdInputContainer', function () {
 
     expect(ariaValue).toBe(`${hintLabel.getAttribute('id')} ${endLabel.getAttribute('id')}`);
   });
+
+  it('should float when floatPlaceholder is set to default and text is entered', () => {
+    let fixture = TestBed.createComponent(MdInputContainerWithDynamicPlaceholder);
+    fixture.detectChanges();
+
+    let inputEl = fixture.debugElement.query(By.css('input')).nativeElement;
+    let labelEl = fixture.debugElement.query(By.css('label')).nativeElement;
+
+    expect(labelEl.classList).not.toContain('md-empty');
+    expect(labelEl.classList).toContain('md-float');
+
+    fixture.componentInstance.shouldFloat = 'auto';
+    fixture.detectChanges();
+
+    expect(labelEl.classList).toContain('md-empty');
+    expect(labelEl.classList).toContain('md-float');
+
+    // Update the value of the input.
+    inputEl.value = 'Text';
+
+    // Fake behavior of the `(input)` event which should trigger a change detection.
+    fixture.detectChanges();
+
+    expect(labelEl.classList).not.toContain('md-empty');
+    expect(labelEl.classList).toContain('md-float');
+  });
+
+  it('should always float the placeholder when floatPlaceholder is set to true', () => {
+    let fixture = TestBed.createComponent(MdInputContainerWithDynamicPlaceholder);
+    fixture.detectChanges();
+
+    let inputEl = fixture.debugElement.query(By.css('input')).nativeElement;
+    let labelEl = fixture.debugElement.query(By.css('label')).nativeElement;
+
+    expect(labelEl.classList).not.toContain('md-empty');
+    expect(labelEl.classList).toContain('md-float');
+
+    fixture.detectChanges();
+
+    // Update the value of the input.
+    inputEl.value = 'Text';
+
+    // Fake behavior of the `(input)` event which should trigger a change detection.
+    fixture.detectChanges();
+
+    expect(labelEl.classList).not.toContain('md-empty');
+    expect(labelEl.classList).toContain('md-float');
+  });
+
+
+  it('should never float the placeholder when floatPlaceholder is set to false', () => {
+    let fixture = TestBed.createComponent(MdInputContainerWithDynamicPlaceholder);
+
+    fixture.componentInstance.shouldFloat = 'never';
+    fixture.detectChanges();
+
+    let inputEl = fixture.debugElement.query(By.css('input')).nativeElement;
+    let labelEl = fixture.debugElement.query(By.css('label')).nativeElement;
+
+    expect(labelEl.classList).toContain('md-empty');
+    expect(labelEl.classList).not.toContain('md-float');
+
+    // Update the value of the input.
+    inputEl.value = 'Text';
+
+    // Fake behavior of the `(input)` event which should trigger a change detection.
+    fixture.detectChanges();
+
+    expect(labelEl.classList).not.toContain('md-empty');
+    expect(labelEl.classList).not.toContain('md-float');
+  });
+
 });
 
 @Component({
@@ -668,13 +741,23 @@ class MdInputContainerWithValueBinding {
 
 @Component({
   template: `
-    <md-input-container [floatingPlaceholder]="false">
+    <md-input-container floatPlaceholder="never">
       <input mdInput placeholder="Label">
     </md-input-container>
   `
 })
 class MdInputContainerWithStaticPlaceholder {}
 
+@Component({
+  template: `
+    <md-input-container [floatPlaceholder]="shouldFloat">
+      <input mdInput placeholder="Label">
+    </md-input-container>`
+})
+class MdInputContainerWithDynamicPlaceholder {
+  shouldFloat: string = 'always';
+}
+
 @Component({
   template: `
     <md-input-container>
diff --git a/src/lib/input/input-container.ts b/src/lib/input/input-container.ts
index fabe76933612..070cb8203263 100644
--- a/src/lib/input/input-container.ts
+++ b/src/lib/input/input-container.ts
@@ -38,6 +38,8 @@ const MD_INPUT_INVALID_TYPES = [
   'submit'
 ];
 
+/** Type for the available floatPlaceholder values. */
+export type FloatPlaceholderType = 'always' | 'never' | 'auto';
 
 let nextUniqueId = 0;
 
@@ -253,6 +255,12 @@ export class MdInputContainer implements AfterContentInit {
   /** Color of the input divider, based on the theme. */
   @Input() dividerColor: 'primary' | 'accent' | 'warn' = 'primary';
 
+  /** Whether the floating label should always float or not. */
+  get _shouldAlwaysFloat() { return this._floatPlaceholder === 'always'; };
+
+  /** Whether the placeholder can float or not. */
+  get _canPlaceholderFloat() { return this._floatPlaceholder !== 'never'; }
+
   /** Text for the input hint. */
   @Input()
   get hintLabel() { return this._hintLabel; }
@@ -265,11 +273,13 @@ export class MdInputContainer implements AfterContentInit {
   // Unique id for the hint label.
   _hintLabelId: string = `md-input-hint-${nextUniqueId++}`;
 
-  /** Text or the floating placeholder. */
+  /** Whether the placeholder should always float, never float or float as the user types. */
   @Input()
-  get floatingPlaceholder(): boolean { return this._floatingPlaceholder; }
-  set floatingPlaceholder(value) { this._floatingPlaceholder = coerceBooleanProperty(value); }
-  private _floatingPlaceholder: boolean = true;
+  get floatPlaceholder() { return this._floatPlaceholder; }
+  set floatPlaceholder(value: FloatPlaceholderType) {
+    this._floatPlaceholder = value || 'auto';
+  }
+  private _floatPlaceholder: FloatPlaceholderType = 'auto';
 
   @ContentChild(MdInputDirective) _mdInputChild: MdInputDirective;
 
diff --git a/src/lib/input/input.md b/src/lib/input/input.md
index ebd0750035f8..9e17b3baf7bb 100644
--- a/src/lib/input/input.md
+++ b/src/lib/input/input.md
@@ -38,9 +38,11 @@ be used with `md-input-container`:
 A placeholder is an indicative text displayed in the input zone when the input does not contain
 text. When text is present, the indicative text will float above this input zone.
 
-The `floatingPlaceholder` attribute of `md-input-container` can be set to `false` to hide the
+The `floatPlaceholder` attribute of `md-input-container` can be set to `never` to hide the
 indicative text instead when text is present in the input.
 
+When setting `floatPlaceholder` to `always` the floating label will always show above the input.
+
 A placeholder for the input can be specified in one of two ways: either using the `placeholder`
 attribute on the `input` or `textarea`, or using an `md-placeholder` element in the
 `md-input-container`. Using both will raise an error.