diff --git a/src/material/autocomplete/autocomplete-trigger.ts b/src/material/autocomplete/autocomplete-trigger.ts
index a8bce97965e5..1bc33c6b512c 100644
--- a/src/material/autocomplete/autocomplete-trigger.ts
+++ b/src/material/autocomplete/autocomplete-trigger.ts
@@ -144,6 +144,9 @@ export class MatAutocompleteTrigger
   /** Value of the input element when the panel was attached (even if there are no options). */
   private _valueOnAttach: string | number | null;
 
+  /** Value on the previous keydown event. */
+  private _valueOnLastKeydown: string | null;
+
   /** Strategy that is used to position the panel. */
   private _positionStrategy: FlexibleConnectedPositionStrategy;
 
@@ -285,13 +288,7 @@ export class MatAutocompleteTrigger
 
   /** Opens the autocomplete suggestion panel. */
   openPanel(): void {
-    this._attachOverlay();
-    this._floatLabel();
-    // Add aria-owns attribute when the autocomplete becomes visible.
-    if (this._trackedModal) {
-      const panelId = this.autocomplete.id;
-      addAriaReferencedId(this._trackedModal, 'aria-owns', panelId);
-    }
+    this._openPanelInternal();
   }
 
   /** Closes the autocomplete suggestion panel. */
@@ -461,6 +458,8 @@ export class MatAutocompleteTrigger
       event.preventDefault();
     }
 
+    this._valueOnLastKeydown = this._element.nativeElement.value;
+
     if (this.activeOption && keyCode === ENTER && this.panelOpen && !hasModifier) {
       this.activeOption._selectViaInteraction();
       this._resetActiveItem();
@@ -472,7 +471,7 @@ export class MatAutocompleteTrigger
       if (keyCode === TAB || (isArrowKey && !hasModifier && this.panelOpen)) {
         this.autocomplete._keyManager.onKeydown(event);
       } else if (isArrowKey && this._canOpen()) {
-        this.openPanel();
+        this._openPanelInternal(this._valueOnLastKeydown);
       }
 
       if (isArrowKey || this.autocomplete._keyManager.activeItem !== prevActiveItem) {
@@ -480,7 +479,7 @@ export class MatAutocompleteTrigger
 
         if (this.autocomplete.autoSelectActiveOption && this.activeOption) {
           if (!this._pendingAutoselectedOption) {
-            this._valueBeforeAutoSelection = this._element.nativeElement.value;
+            this._valueBeforeAutoSelection = this._valueOnLastKeydown;
           }
 
           this._pendingAutoselectedOption = this.activeOption;
@@ -523,7 +522,7 @@ export class MatAutocompleteTrigger
         const selectedOption = this.autocomplete.options?.find(option => option.selected);
 
         if (selectedOption) {
-          const display = this.autocomplete.displayWith?.(selectedOption) ?? selectedOption.value;
+          const display = this._getDisplayValue(selectedOption.value);
 
           if (value !== display) {
             selectedOption.deselect(false);
@@ -532,7 +531,14 @@ export class MatAutocompleteTrigger
       }
 
       if (this._canOpen() && this._document.activeElement === event.target) {
-        this.openPanel();
+        // When the `input` event fires, the input's value will have already changed. This means
+        // that if we take the `this._element.nativeElement.value` directly, it'll be one keystroke
+        // behind. This can be a problem when the user selects a value, changes a character while
+        // the input still has focus and then clicks away (see #28432). To work around it, we
+        // capture the value in `keydown` so we can use it here.
+        const valueOnAttach = this._valueOnLastKeydown ?? this._element.nativeElement.value;
+        this._valueOnLastKeydown = null;
+        this._openPanelInternal(valueOnAttach);
       }
     }
   }
@@ -542,14 +548,14 @@ export class MatAutocompleteTrigger
       this._canOpenOnNextFocus = true;
     } else if (this._canOpen()) {
       this._previousValue = this._element.nativeElement.value;
-      this._attachOverlay();
+      this._attachOverlay(this._previousValue);
       this._floatLabel(true);
     }
   }
 
   _handleClick(): void {
     if (this._canOpen() && !this.panelOpen) {
-      this.openPanel();
+      this._openPanelInternal();
     }
   }
 
@@ -657,11 +663,14 @@ export class MatAutocompleteTrigger
     }
   }
 
+  /** Given a value, returns the string that should be shown within the input. */
+  private _getDisplayValue<T>(value: T): T | string {
+    const autocomplete = this.autocomplete;
+    return autocomplete && autocomplete.displayWith ? autocomplete.displayWith(value) : value;
+  }
+
   private _assignOptionValue(value: any): void {
-    const toDisplay =
-      this.autocomplete && this.autocomplete.displayWith
-        ? this.autocomplete.displayWith(value)
-        : value;
+    const toDisplay = this._getDisplayValue(value);
 
     if (value == null) {
       this._clearPreviousSelectedOption(null, false);
@@ -733,7 +742,17 @@ export class MatAutocompleteTrigger
     });
   }
 
-  private _attachOverlay(): void {
+  private _openPanelInternal(valueOnAttach = this._element.nativeElement.value) {
+    this._attachOverlay(valueOnAttach);
+    this._floatLabel();
+    // Add aria-owns attribute when the autocomplete becomes visible.
+    if (this._trackedModal) {
+      const panelId = this.autocomplete.id;
+      addAriaReferencedId(this._trackedModal, 'aria-owns', panelId);
+    }
+  }
+
+  private _attachOverlay(valueOnAttach: string): void {
     if (!this.autocomplete && (typeof ngDevMode === 'undefined' || ngDevMode)) {
       throw getMatAutocompleteMissingPanelError();
     }
@@ -759,7 +778,8 @@ export class MatAutocompleteTrigger
 
     if (overlayRef && !overlayRef.hasAttached()) {
       overlayRef.attach(this._portal);
-      this._valueOnAttach = this._element.nativeElement.value;
+      this._valueOnAttach = valueOnAttach;
+      this._valueOnLastKeydown = null;
       this._closingActionsSubscription = this._subscribeToClosingActions();
     }
 
diff --git a/src/material/autocomplete/autocomplete.spec.ts b/src/material/autocomplete/autocomplete.spec.ts
index e4150c61b7d7..9632f858a588 100644
--- a/src/material/autocomplete/autocomplete.spec.ts
+++ b/src/material/autocomplete/autocomplete.spec.ts
@@ -2780,6 +2780,48 @@ describe('MDC-based MatAutocomplete', () => {
       expect(spy).not.toHaveBeenCalled();
       subscription.unsubscribe();
     }));
+
+    it('should clear the value if requireSelection is enabled and the user edits the input before clicking away', fakeAsync(() => {
+      const input = fixture.nativeElement.querySelector('input');
+      const {stateCtrl, trigger} = fixture.componentInstance;
+      fixture.componentInstance.requireSelection = true;
+      fixture.detectChanges();
+      tick();
+
+      // Simulate opening the input and clicking the first option.
+      trigger.openPanel();
+      fixture.detectChanges();
+      zone.simulateZoneExit();
+      (overlayContainerElement.querySelector('mat-option') as HTMLElement).click();
+      tick();
+      fixture.detectChanges();
+
+      expect(trigger.panelOpen).toBe(false);
+      expect(input.value).toBe('Alabama');
+      expect(stateCtrl.value).toEqual({code: 'AL', name: 'Alabama'});
+
+      // Simulate pressing backspace while focus is still on the input.
+      dispatchFakeEvent(input, 'keydown');
+      input.value = 'Alabam';
+      fixture.detectChanges();
+      dispatchFakeEvent(input, 'input');
+      fixture.detectChanges();
+      zone.simulateZoneExit();
+
+      expect(trigger.panelOpen).toBe(true);
+      expect(input.value).toBe('Alabam');
+      expect(stateCtrl.value).toEqual({code: 'AL', name: 'Alabama'});
+
+      // Simulate clicking away.
+      input.blur();
+      dispatchFakeEvent(document, 'click');
+      fixture.detectChanges();
+      tick();
+
+      expect(trigger.panelOpen).toBe(false);
+      expect(input.value).toBe('');
+      expect(stateCtrl.value).toBe(null);
+    }));
   });
 
   describe('panel closing', () => {