diff --git a/src/lib/list/selection-list.spec.ts b/src/lib/list/selection-list.spec.ts
index 8f3abdd5679a..ff75fb24088e 100644
--- a/src/lib/list/selection-list.spec.ts
+++ b/src/lib/list/selection-list.spec.ts
@@ -214,6 +214,7 @@ describe('MatSelectionList without forms', () => {
     it('should restore focus if active option is destroyed', () => {
       const manager = selectionList.componentInstance._keyManager;
 
+      spyOn(listOptions[2].componentInstance, 'focus').and.callThrough();
       listOptions[3].componentInstance._handleFocus();
 
       expect(manager.activeItemIndex).toBe(3);
@@ -222,8 +223,28 @@ describe('MatSelectionList without forms', () => {
       fixture.detectChanges();
 
       expect(manager.activeItemIndex).toBe(2);
+      expect(listOptions[2].componentInstance.focus).toHaveBeenCalled();
     });
 
+    it('should not attempt to focus the next option when the destroyed option was not focused',
+      () => {
+        const manager = selectionList.componentInstance._keyManager;
+
+        // Focus and blur the option to move the active item index.
+        listOptions[3].componentInstance._handleFocus();
+        listOptions[3].componentInstance._handleBlur();
+
+        spyOn(listOptions[2].componentInstance, 'focus').and.callThrough();
+
+        expect(manager.activeItemIndex).toBe(3);
+
+        fixture.componentInstance.showLastOption = false;
+        fixture.detectChanges();
+
+        expect(manager.activeItemIndex).toBe(2);
+        expect(listOptions[2].componentInstance.focus).not.toHaveBeenCalled();
+      });
+
     it('should focus previous item when press UP ARROW', () => {
       let testListItem = listOptions[2].nativeElement as HTMLElement;
       let UP_EVENT: KeyboardEvent =
diff --git a/src/lib/list/selection-list.ts b/src/lib/list/selection-list.ts
index e62c2c41e13a..dccd28866b40 100644
--- a/src/lib/list/selection-list.ts
+++ b/src/lib/list/selection-list.ts
@@ -98,6 +98,7 @@ export class MatListOption extends _MatListOptionMixinBase
 
   private _selected = false;
   private _disabled = false;
+  private _hasFocus = false;
 
   @ContentChild(MatListAvatarCssMatStyler) _avatar: MatListAvatarCssMatStyler;
   @ContentChild(MatListIconCssMatStyler) _icon: MatListIconCssMatStyler;
@@ -172,7 +173,13 @@ export class MatListOption extends _MatListOptionMixinBase
       Promise.resolve().then(() => this.selected = false);
     }
 
-    this.selectionList._removeOptionFromList(this);
+    const hadFocus = this._hasFocus;
+    const newActiveItem = this.selectionList._removeOptionFromList(this);
+
+    // Only move focus if this option was focused at the time it was destroyed.
+    if (hadFocus && newActiveItem) {
+      newActiveItem.focus();
+    }
   }
 
   /** Toggles the selection state of the option. */
@@ -209,10 +216,12 @@ export class MatListOption extends _MatListOptionMixinBase
 
   _handleFocus() {
     this.selectionList._setFocusedOption(this);
+    this._hasFocus = true;
   }
 
   _handleBlur() {
     this.selectionList._onTouched();
+    this._hasFocus = false;
   }
 
   /** Retrieves the DOM element of the component host. */
@@ -385,18 +394,23 @@ export class MatSelectionList extends _MatSelectionListMixinBase implements Focu
     this._keyManager.updateActiveItemIndex(this._getOptionIndex(option));
   }
 
-  /** Removes an option from the selection list and updates the active item. */
-  _removeOptionFromList(option: MatListOption) {
+  /**
+   * Removes an option from the selection list and updates the active item.
+   * @returns Currently-active item.
+   */
+  _removeOptionFromList(option: MatListOption): MatListOption | null {
     const optionIndex = this._getOptionIndex(option);
 
     if (optionIndex > -1 && this._keyManager.activeItemIndex === optionIndex) {
       // Check whether the option is the last item
       if (optionIndex > 0) {
-        this._keyManager.setPreviousItemActive();
+        this._keyManager.updateActiveItemIndex(optionIndex - 1);
       } else if (optionIndex === 0 && this.options.length > 1) {
-        this._keyManager.setNextItemActive();
+        this._keyManager.updateActiveItemIndex(Math.min(optionIndex + 1, this.options.length - 1));
       }
     }
+
+    return this._keyManager.activeItem;
   }
 
   /** Passes relevant key presses to our key manager. */