diff --git a/src/lib/autocomplete/autocomplete-trigger.ts b/src/lib/autocomplete/autocomplete-trigger.ts
index cdc00c36aeba..a733b9b68b9f 100644
--- a/src/lib/autocomplete/autocomplete-trigger.ts
+++ b/src/lib/autocomplete/autocomplete-trigger.ts
@@ -298,6 +298,7 @@ export class MdAutocompleteTrigger implements ControlValueAccessor, OnDestroy {
   _handleKeydown(event: KeyboardEvent): void {
     if (event.keyCode === ESCAPE && this.panelOpen) {
       this.closePanel();
+      event.stopPropagation();
     } else if (this.activeOption && event.keyCode === ENTER && this.panelOpen) {
       this.activeOption._selectViaInteraction();
       event.preventDefault();
diff --git a/src/lib/autocomplete/autocomplete.spec.ts b/src/lib/autocomplete/autocomplete.spec.ts
index d043c13ee17f..a876338d6d42 100644
--- a/src/lib/autocomplete/autocomplete.spec.ts
+++ b/src/lib/autocomplete/autocomplete.spec.ts
@@ -897,6 +897,7 @@ describe('MdAutocomplete', () => {
     it('should close the panel when pressing escape', async(() => {
       const trigger = fixture.componentInstance.trigger;
       const escapeEvent = createKeyboardEvent('keydown', ESCAPE);
+      const stopPropagationSpy = spyOn(escapeEvent, 'stopPropagation').and.callThrough();
 
       input.focus();
 
@@ -908,6 +909,7 @@ describe('MdAutocomplete', () => {
 
         expect(document.activeElement).toBe(input, 'Expected input to continue to be focused.');
         expect(trigger.panelOpen).toBe(false, 'Expected panel to be closed.');
+        expect(stopPropagationSpy).toHaveBeenCalled();
       });
     }));
 
diff --git a/src/lib/datepicker/datepicker.spec.ts b/src/lib/datepicker/datepicker.spec.ts
index 6f8a891fca51..8b7309003719 100644
--- a/src/lib/datepicker/datepicker.spec.ts
+++ b/src/lib/datepicker/datepicker.spec.ts
@@ -9,8 +9,13 @@ import {MdDatepickerInput} from './datepicker-input';
 import {MdInputModule} from '../input/index';
 import {MdNativeDateModule} from '../core/datetime/index';
 import {ESCAPE, OverlayContainer} from '../core';
-import {dispatchFakeEvent, dispatchMouseEvent, dispatchKeyboardEvent} from '@angular/cdk/testing';
 import {DEC, JAN} from '../core/testing/month-constants';
+import {
+  dispatchFakeEvent,
+  dispatchMouseEvent,
+  createKeyboardEvent,
+  dispatchEvent,
+} from '@angular/cdk/testing';
 
 describe('MdDatepicker', () => {
   afterEach(inject([OverlayContainer], (container: OverlayContainer) => {
@@ -134,13 +139,17 @@ describe('MdDatepicker', () => {
         let content = document.querySelector('.cdk-overlay-pane md-datepicker-content')!;
         expect(content).toBeTruthy('Expected datepicker to be open.');
 
-        let keyboadEvent = dispatchKeyboardEvent(content, 'keydown', ESCAPE);
+        const keyboardEvent = createKeyboardEvent('keydown', ESCAPE);
+        const stopPropagationSpy = spyOn(keyboardEvent, 'stopPropagation').and.callThrough();
+
+        dispatchEvent(content, keyboardEvent);
         fixture.detectChanges();
 
         content = document.querySelector('.cdk-overlay-pane md-datepicker-content')!;
 
         expect(content).toBeFalsy('Expected datepicker to be closed.');
-        expect(keyboadEvent.defaultPrevented)
+        expect(stopPropagationSpy).toHaveBeenCalled();
+        expect(keyboardEvent.defaultPrevented)
             .toBe(true, 'Expected default ESCAPE action to be prevented.');
       });
 
diff --git a/src/lib/datepicker/datepicker.ts b/src/lib/datepicker/datepicker.ts
index 2200b1c0eaea..058ab377f19d 100644
--- a/src/lib/datepicker/datepicker.ts
+++ b/src/lib/datepicker/datepicker.ts
@@ -106,6 +106,7 @@ export class MdDatepickerContent<D> implements AfterContentInit {
     if (event.keyCode === ESCAPE) {
       this.datepicker.close();
       event.preventDefault();
+      event.stopPropagation();
     }
   }
 }
diff --git a/src/lib/menu/menu-directive.ts b/src/lib/menu/menu-directive.ts
index 021131e3ae9c..7e0ea30f3468 100644
--- a/src/lib/menu/menu-directive.ts
+++ b/src/lib/menu/menu-directive.ts
@@ -168,6 +168,7 @@ export class MdMenu implements AfterContentInit, MdMenuPanel, OnDestroy {
     switch (event.keyCode) {
       case ESCAPE:
         this.close.emit('keydown');
+        event.stopPropagation();
       break;
       case LEFT_ARROW:
         if (this.parentMenu && this.direction === 'ltr') {
diff --git a/src/lib/menu/menu.spec.ts b/src/lib/menu/menu.spec.ts
index c1e177b1ec7e..775a6826f5f7 100644
--- a/src/lib/menu/menu.spec.ts
+++ b/src/lib/menu/menu.spec.ts
@@ -29,7 +29,12 @@ import {
 } from './index';
 import {MENU_PANEL_TOP_PADDING} from './menu-trigger';
 import {extendObject} from '../core/util/object-extend';
-import {dispatchKeyboardEvent, dispatchMouseEvent} from '@angular/cdk/testing';
+import {
+  dispatchKeyboardEvent,
+  dispatchMouseEvent,
+  dispatchEvent,
+  createKeyboardEvent,
+} from '@angular/cdk/testing';
 
 
 describe('MdMenu', () => {
@@ -103,11 +108,15 @@ describe('MdMenu', () => {
     fixture.componentInstance.trigger.openMenu();
 
     const panel = overlayContainerElement.querySelector('.mat-menu-panel')!;
-    dispatchKeyboardEvent(panel, 'keydown', ESCAPE);
+    const event = createKeyboardEvent('keydown', ESCAPE);
+    const stopPropagationSpy = spyOn(event, 'stopPropagation').and.callThrough();
+
+    dispatchEvent(panel, event);
     fixture.detectChanges();
     tick(500);
 
     expect(overlayContainerElement.textContent).toBe('');
+    expect(stopPropagationSpy).toHaveBeenCalled();
   }));
 
   it('should open a custom menu', () => {