diff --git a/ash/wm/lock_layout_manager_unittest.cc b/ash/wm/lock_layout_manager_unittest.cc
index 70984c49f9f19..b680ba21a9718 100644
--- a/ash/wm/lock_layout_manager_unittest.cc
+++ b/ash/wm/lock_layout_manager_unittest.cc
@@ -2,6 +2,7 @@
 // Use of this source code is governed by a BSD-style license that can be
 // found in the LICENSE file.
 
+#include "ash/display/display_manager.h"
 #include "ash/root_window_controller.h"
 #include "ash/screen_util.h"
 #include "ash/shell.h"
@@ -187,7 +188,8 @@ TEST_F(LockLayoutManagerTest, MaximizedFullscreenWindowBoundsAreEqualToScreen) {
 }
 
 TEST_F(LockLayoutManagerTest, KeyboardBounds) {
-  gfx::Rect screen_bounds = Shell::GetScreen()->GetPrimaryDisplay().bounds();
+  gfx::Display primary_display = Shell::GetScreen()->GetPrimaryDisplay();
+  gfx::Rect screen_bounds = primary_display.bounds();
 
   views::Widget::InitParams widget_params(
       views::Widget::InitParams::TYPE_WINDOW_FRAMELESS);
@@ -203,8 +205,30 @@ TEST_F(LockLayoutManagerTest, KeyboardBounds) {
        keyboard::KEYBOARD_OVERSCROLL_OVERRIDE_ENABLED);
   ShowKeyboard(true);
   EXPECT_EQ(screen_bounds.ToString(), window->GetBoundsInScreen().ToString());
+  gfx::Rect keyboard_bounds =
+      keyboard::KeyboardController::GetInstance()->current_keyboard_bounds();
+  EXPECT_NE(keyboard_bounds, gfx::Rect());
   ShowKeyboard(false);
 
+  // When keyboard is hidden make sure that rotating the screen gives 100% of
+  // screen size to window.
+  // Repro steps for http://crbug.com/401667:
+  // 1. Set up login screen defaults: VK override disabled
+  // 2. Show/hide keyboard, make sure that no stale keyboard bounds are cached.
+  keyboard::SetKeyboardOverscrollOverride(
+       keyboard::KEYBOARD_OVERSCROLL_OVERRIDE_DISABLED);
+  ShowKeyboard(true);
+  ShowKeyboard(false);
+  ash::DisplayManager* display_manager =
+      Shell::GetInstance()->display_manager();
+  display_manager->SetDisplayRotation(primary_display.id(),
+                                      gfx::Display::ROTATE_90);
+  primary_display = Shell::GetScreen()->GetPrimaryDisplay();
+  screen_bounds = primary_display.bounds();
+  EXPECT_EQ(screen_bounds.ToString(), window->GetBoundsInScreen().ToString());
+  display_manager->SetDisplayRotation(primary_display.id(),
+                                      gfx::Display::ROTATE_0);
+
   // When virtual keyboard overscroll is disabled keyboard bounds do
   // affect window bounds.
   keyboard::SetKeyboardOverscrollOverride(
@@ -212,6 +236,8 @@ TEST_F(LockLayoutManagerTest, KeyboardBounds) {
   ShowKeyboard(true);
   keyboard::KeyboardController* keyboard =
         keyboard::KeyboardController::GetInstance();
+  primary_display = Shell::GetScreen()->GetPrimaryDisplay();
+  screen_bounds = primary_display.bounds();
   gfx::Rect target_bounds(screen_bounds);
   target_bounds.set_height(target_bounds.height() -
       keyboard->proxy()->GetKeyboardWindow()->bounds().height());
diff --git a/ash/wm/lock_window_state.cc b/ash/wm/lock_window_state.cc
index 5d38b59e8e51b..fa1684fda80da 100644
--- a/ash/wm/lock_window_state.cc
+++ b/ash/wm/lock_window_state.cc
@@ -167,12 +167,17 @@ void LockWindowState::UpdateBounds(wm::WindowState* window_state) {
       keyboard::KeyboardController::GetInstance();
   gfx::Rect keyboard_bounds;
 
-  if (keyboard_controller && !keyboard::IsKeyboardOverscrollEnabled())
+  if (keyboard_controller &&
+      !keyboard::IsKeyboardOverscrollEnabled() &&
+      keyboard_controller->keyboard_visible()) {
     keyboard_bounds = keyboard_controller->current_keyboard_bounds();
+  }
 
   gfx::Rect bounds =
       ScreenUtil::GetDisplayBoundsInParent(window_state->window());
   bounds.set_height(bounds.height() - keyboard_bounds.height());
+
+  VLOG(1) << "Updating window bounds to: " << bounds.ToString();
   window_state->SetBoundsDirect(bounds);
 }
 
diff --git a/ui/keyboard/keyboard_controller.cc b/ui/keyboard/keyboard_controller.cc
index f74ff7a612e1b..029a5a43d4b1b 100644
--- a/ui/keyboard/keyboard_controller.cc
+++ b/ui/keyboard/keyboard_controller.cc
@@ -305,6 +305,8 @@ void KeyboardController::NotifyKeyboardBoundsChanging(
     } else {
       ResetWindowInsets();
     }
+  } else {
+    current_keyboard_bounds_ = gfx::Rect();
   }
 }
 
diff --git a/ui/keyboard/keyboard_layout_manager.cc b/ui/keyboard/keyboard_layout_manager.cc
index d7faf0fa7ab27..9946060cd9668 100644
--- a/ui/keyboard/keyboard_layout_manager.cc
+++ b/ui/keyboard/keyboard_layout_manager.cc
@@ -56,7 +56,10 @@ void KeyboardLayoutManager::SetChildBounds(aura::Window* child,
     // case the show keyboard request is called before the height is set.
     controller_->ShowKeyboard(false);
   } else {
-    controller_->NotifyKeyboardBoundsChanging(requested_bounds);
+    // We need to send out this notification only if keyboard is visible since
+    // keyboard window is resized even if keyboard is hidden.
+    if (controller_->keyboard_visible())
+      controller_->NotifyKeyboardBoundsChanging(requested_bounds);
   }
 }