diff --git a/src/lib/core/overlay/overlay-ref.ts b/src/lib/core/overlay/overlay-ref.ts
index 0a8e42d2ffda..8da9d5c5dc97 100644
--- a/src/lib/core/overlay/overlay-ref.ts
+++ b/src/lib/core/overlay/overlay-ref.ts
@@ -30,13 +30,10 @@ export class OverlayRef implements PortalHost {
    * @returns The portal attachment result.
    */
   attach(portal: Portal<any>): any {
-    if (this._state.hasBackdrop) {
-      this._attachBackdrop();
-    }
-
     let attachResult = this._portalHost.attach(portal);
 
     // Update the pane element with the given state configuration.
+    this._updateStackingOrder();
     this.updateSize();
     this.updateDirection();
     this.updatePosition();
@@ -44,6 +41,10 @@ export class OverlayRef implements PortalHost {
     // Enable pointer events for the overlay pane element.
     this._togglePointerEvents(true);
 
+    if (this._state.hasBackdrop) {
+      this._attachBackdrop();
+    }
+
     return attachResult;
   }
 
@@ -153,6 +154,19 @@ export class OverlayRef implements PortalHost {
     });
   }
 
+  /**
+   * Updates the stacking order of the element, moving it to the top if necessary.
+   * This is required in cases where one overlay was detached, while another one,
+   * that should be behind it, was destroyed. The next time both of them are opened,
+   * the stacking will be wrong, because the detached element's pane will still be
+   * in its original DOM position.
+   */
+  private _updateStackingOrder() {
+    if (this._pane.nextSibling) {
+      this._pane.parentNode.appendChild(this._pane);
+    }
+  }
+
   /** Detaches the backdrop (if any) associated with the overlay. */
   detachBackdrop(): void {
     let backdropToDetach = this._backdropElement;
diff --git a/src/lib/core/overlay/overlay.spec.ts b/src/lib/core/overlay/overlay.spec.ts
index 328809e4d272..348f1cdcb51c 100644
--- a/src/lib/core/overlay/overlay.spec.ts
+++ b/src/lib/core/overlay/overlay.spec.ts
@@ -100,6 +100,31 @@ describe('Overlay', () => {
     expect(overlayContainerElement.textContent).toBe('');
   });
 
+  it('should ensure that the most-recently-attached overlay is on top', () => {
+    let pizzaOverlayRef = overlay.create();
+    let cakeOverlayRef = overlay.create();
+
+    pizzaOverlayRef.attach(componentPortal);
+    cakeOverlayRef.attach(templatePortal);
+
+    expect(pizzaOverlayRef.overlayElement.nextSibling)
+        .toBeTruthy('Expected pizza to be on the bottom.');
+    expect(cakeOverlayRef.overlayElement.nextSibling)
+        .toBeFalsy('Expected cake to be on top.');
+
+    pizzaOverlayRef.dispose();
+    cakeOverlayRef.detach();
+
+    pizzaOverlayRef = overlay.create();
+    pizzaOverlayRef.attach(componentPortal);
+    cakeOverlayRef.attach(templatePortal);
+
+    expect(pizzaOverlayRef.overlayElement.nextSibling)
+        .toBeTruthy('Expected pizza to still be on the bottom.');
+    expect(cakeOverlayRef.overlayElement.nextSibling)
+        .toBeFalsy('Expected cake to still be on top.');
+  });
+
   it('should set the direction', () => {
     const state = new OverlayState();
     state.direction = 'rtl';