diff --git a/src/cdk/a11y/key-manager/list-key-manager.spec.ts b/src/cdk/a11y/key-manager/list-key-manager.spec.ts
index fdbcd65d4dec..439344abe4b4 100644
--- a/src/cdk/a11y/key-manager/list-key-manager.spec.ts
+++ b/src/cdk/a11y/key-manager/list-key-manager.spec.ts
@@ -93,6 +93,42 @@ describe('Key managers', () => {
       expect(keyManager.activeItem!.getLabel()).toBe('one');
     });
 
+    it('should update the active item if the current one is removed and there is ' +
+      'a new one at the same index', () => {
+        expect(keyManager.activeItemIndex).toBe(0);
+        expect(keyManager.activeItem!.getLabel()).toBe('one');
+
+        itemList.reset([new FakeFocusable('new-0'), new FakeFocusable('new-1')]);
+        itemList.notifyOnChanges();
+
+        expect(keyManager.activeItemIndex).toBe(0);
+        expect(keyManager.activeItem!.getLabel()).toBe('new-0');
+      });
+
+    it('should clear the active item if nothing exists at the new index', () => {
+      keyManager.setActiveItem(2);
+
+      expect(keyManager.activeItemIndex).toBe(2);
+      expect(keyManager.activeItem!.getLabel()).toBe('three');
+
+      itemList.reset(itemList.toArray().slice(0, 1));
+      itemList.notifyOnChanges();
+
+      expect(keyManager.activeItemIndex).toBe(-1);
+      expect(keyManager.activeItem).toBe(null);
+    });
+
+    it('should clear the active item if the list is cleared', () => {
+      expect(keyManager.activeItemIndex).toBe(0);
+      expect(keyManager.activeItem!.getLabel()).toBe('one');
+
+      itemList.reset([]);
+      itemList.notifyOnChanges();
+
+      expect(keyManager.activeItemIndex).toBe(-1);
+      expect(keyManager.activeItem).toBe(null);
+    });
+
     it('should start off the activeItem as null', () => {
       expect(new ListKeyManager([]).activeItem).toBeNull();
     });
diff --git a/src/cdk/a11y/key-manager/list-key-manager.ts b/src/cdk/a11y/key-manager/list-key-manager.ts
index fcd27e27c7e0..afeaa42e8825 100644
--- a/src/cdk/a11y/key-manager/list-key-manager.ts
+++ b/src/cdk/a11y/key-manager/list-key-manager.ts
@@ -70,7 +70,9 @@ export class ListKeyManager<T extends ListKeyManagerOption> {
           const itemArray = newItems.toArray();
           const newIndex = itemArray.indexOf(this._activeItem);
 
-          if (newIndex > -1 && newIndex !== this._activeItemIndex) {
+          if (newIndex === -1) {
+            this.updateActiveItem(this._activeItemIndex);
+          } else if (newIndex !== this._activeItemIndex) {
             this._activeItemIndex = newIndex;
           }
         }
@@ -349,7 +351,7 @@ export class ListKeyManager<T extends ListKeyManagerOption> {
 
     // Explicitly check for `null` and `undefined` because other falsy values are valid.
     this._activeItem = activeItem == null ? null : activeItem;
-    this._activeItemIndex = index;
+    this._activeItemIndex = activeItem == null ? -1 : index;
   }
 
   /**