diff --git a/src/lib/slider/slider.html b/src/lib/slider/slider.html
index a50837a8e39c..a18361956483 100644
--- a/src/lib/slider/slider.html
+++ b/src/lib/slider/slider.html
@@ -9,7 +9,7 @@
   <div class="md-slider-thumb-container" [ngStyle]="thumbContainerStyles">
     <div class="md-slider-thumb"></div>
     <div class="md-slider-thumb-label">
-      <span class="md-slider-thumb-label-text">{{value}}</span>
+      <span class="md-slider-thumb-label-text">{{displayValue}}</span>
     </div>
   </div>
 </div>
diff --git a/src/lib/slider/slider.spec.ts b/src/lib/slider/slider.spec.ts
index e7acc53f8eed..18017694679e 100644
--- a/src/lib/slider/slider.spec.ts
+++ b/src/lib/slider/slider.spec.ts
@@ -431,6 +431,29 @@ describe('MdSlider', () => {
       // The closest snap is at the end of the slider.
       expect(trackFillElement.style.transform).toContain('scaleX(1)');
     });
+
+    it('should round the value inside the label based on the provided step', () => {
+      let testStep = (step: number, expected: string) => {
+        fixture.componentInstance.step = step;
+        fixture.detectChanges();
+        dispatchSlideEventSequence(sliderNativeElement, 0, 0.333333, gestureConfig);
+        expect(sliderDebugElement.componentInstance.displayValue.toString()).toBe(expected);
+      };
+
+      testStep(1, '33');
+      testStep(0.1, '33.3');
+      testStep(0.01, '33.33');
+      testStep(0.001, '33.333');
+    });
+
+    it('should not add decimals to the value if it is a whole number', () => {
+      fixture.componentInstance.step = 0.1;
+      fixture.detectChanges();
+
+      dispatchSlideEventSequence(sliderNativeElement, 0, 1, gestureConfig);
+
+      expect(sliderDebugElement.componentInstance.displayValue).toBe(100);
+    });
   });
 
   describe('slider with auto ticks', () => {
@@ -1162,10 +1185,12 @@ class SliderWithMinAndMax {
 class SliderWithValue { }
 
 @Component({
-  template: `<md-slider step="25"></md-slider>`,
+  template: `<md-slider [step]="step"></md-slider>`,
   styles: [styles],
 })
-class SliderWithStep { }
+class SliderWithStep {
+  step = 25;
+}
 
 @Component({
   template: `<md-slider step="5" tickInterval="auto"></md-slider>`,
diff --git a/src/lib/slider/slider.ts b/src/lib/slider/slider.ts
index 45935eccf562..e874791180bc 100644
--- a/src/lib/slider/slider.ts
+++ b/src/lib/slider/slider.ts
@@ -147,12 +147,21 @@ export class MdSlider implements ControlValueAccessor {
    */
   _isActive: boolean = false;
 
+  /** Decimal places to round to, based on the step amount. */
+  private _roundLabelTo: number;
+
   private _step: number = 1;
 
   /** The values at which the thumb will snap. */
   @Input()
   get step() { return this._step; }
-  set step(v) { this._step = coerceNumberProperty(v, this._step); }
+  set step(v) {
+    this._step = coerceNumberProperty(v, this._step);
+
+    if (this._step % 1 !== 0) {
+      this._roundLabelTo = this._step.toString().split('.').pop().length;
+    }
+  }
 
   private _tickInterval: 'auto' | number = 0;
 
@@ -238,6 +247,18 @@ export class MdSlider implements ControlValueAccessor {
   set vertical(value: any) { this._vertical = coerceBooleanProperty(value); }
   private _vertical = false;
 
+  /** The value to be used for display purposes. */
+  get displayValue(): string|number {
+    // Note that this could be improved further by rounding something like 0.999 to 1 or
+    // 0.899 to 0.9, however it is very performance sensitive, because it gets called on
+    // every change detection cycle.
+    if (this._roundLabelTo && this.value % 1 !== 0) {
+      return this.value.toFixed(this._roundLabelTo);
+    }
+
+    return this.value;
+  }
+
   /**
    * Whether the axis of the slider is inverted.
    * (i.e. whether moving the thumb in the positive x or y direction decreases the slider's value).