diff --git a/dist/select.js b/dist/select.js
index 3dd469ca5..41de619f2 100644
--- a/dist/select.js
+++ b/dist/select.js
@@ -101,6 +101,7 @@ angular.module('ui.select', [])
   ctrl.selected = undefined;
   ctrl.open = false;
   ctrl.disabled = false;
+  ctrl.allowNewValues = false;
 
   ctrl.searchInput = $element.querySelectorAll('input.ui-select-search');
 
@@ -151,6 +152,10 @@ angular.module('ui.select', [])
 
   // When the user clicks on an item inside the dropdown list
   ctrl.select = function(item) {
+    if(ctrl.allowNewValues && !item && ctrl.search.length > 0) {
+      // create new item on the fly
+      item = ctrl.search;
+    }
     ctrl.selected = item;
     ctrl.close();
     // Using a watch instead of $scope.ngModel.$setViewValue(item)
@@ -220,6 +225,8 @@ angular.module('ui.select', [])
       attrs.$observe('disabled', function() {
         $select.disabled = attrs.disabled ? true : false;
       });
+      
+      $select.allowNewValues = attrs.allowNewValues ? true : false;
 
       scope.$watch('$select.selected', function(newValue, oldValue) {
         if (ngModel.$viewValue !== newValue) {
@@ -236,13 +243,15 @@ angular.module('ui.select', [])
         var rows = container.querySelectorAll('.ui-select-choices-row');
 
         var highlighted = rows[$select.activeIndex];
-        var posY = highlighted.offsetTop + highlighted.clientHeight - container[0].scrollTop;
-        var height = container[0].offsetHeight;
-
-        if (posY > height) {
-          container[0].scrollTop += posY - height;
-        } else if (posY < highlighted.clientHeight) {
-          container[0].scrollTop -= highlighted.clientHeight - posY;
+        if(highlighted) {
+          var posY = highlighted.offsetTop + highlighted.clientHeight - container[0].scrollTop;
+          var height = container[0].offsetHeight;
+
+          if (posY > height) {
+            container[0].scrollTop += posY - height;
+          } else if (posY < highlighted.clientHeight) {
+            container[0].scrollTop -= highlighted.clientHeight - posY;
+          }
         }
       }
 
@@ -326,7 +335,8 @@ angular.module('ui.select', [])
         $select.parseRepeatAttr(attrs.repeat);
 
         scope.$watch('$select.search', function() {
-          $select.activeIndex = 0;
+          // do not autoselect first value if new values are allowed
+          $select.activeIndex = $select.allowNewValues ? -1 : 0;
           $select.populateItems(attrs.repeat);
         });
       };
diff --git a/src/select.js b/src/select.js
index c89cca41d..a59bf6cdc 100644
--- a/src/select.js
+++ b/src/select.js
@@ -101,6 +101,7 @@ angular.module('ui.select', [])
   ctrl.selected = undefined;
   ctrl.open = false;
   ctrl.disabled = false;
+  ctrl.allowNewValues = false;
 
   ctrl.searchInput = $element.querySelectorAll('input.ui-select-search');
 
@@ -151,6 +152,10 @@ angular.module('ui.select', [])
 
   // When the user clicks on an item inside the dropdown list
   ctrl.select = function(item) {
+    if(ctrl.allowNewValues && !item && ctrl.search.length > 0) {
+      // create new item on the fly
+      item = ctrl.search;
+    }
     ctrl.selected = item;
     ctrl.close();
     // Using a watch instead of $scope.ngModel.$setViewValue(item)
@@ -220,6 +225,8 @@ angular.module('ui.select', [])
       attrs.$observe('disabled', function() {
         $select.disabled = attrs.disabled ? true : false;
       });
+      
+      $select.allowNewValues = attrs.allowNewValues ? true : false;
 
       scope.$watch('$select.selected', function(newValue, oldValue) {
         if (ngModel.$viewValue !== newValue) {
@@ -236,13 +243,15 @@ angular.module('ui.select', [])
         var rows = container.querySelectorAll('.ui-select-choices-row');
 
         var highlighted = rows[$select.activeIndex];
-        var posY = highlighted.offsetTop + highlighted.clientHeight - container[0].scrollTop;
-        var height = container[0].offsetHeight;
-
-        if (posY > height) {
-          container[0].scrollTop += posY - height;
-        } else if (posY < highlighted.clientHeight) {
-          container[0].scrollTop -= highlighted.clientHeight - posY;
+        if(highlighted) {
+          var posY = highlighted.offsetTop + highlighted.clientHeight - container[0].scrollTop;
+          var height = container[0].offsetHeight;
+
+          if (posY > height) {
+            container[0].scrollTop += posY - height;
+          } else if (posY < highlighted.clientHeight) {
+            container[0].scrollTop -= highlighted.clientHeight - posY;
+          }
         }
       }
 
@@ -326,7 +335,8 @@ angular.module('ui.select', [])
         $select.parseRepeatAttr(attrs.repeat);
 
         scope.$watch('$select.search', function() {
-          $select.activeIndex = 0;
+          // do not autoselect first value if new values are allowed
+          $select.activeIndex = $select.allowNewValues ? -1 : 0;
           $select.populateItems(attrs.repeat);
         });
       };
diff --git a/test/select.spec.js b/test/select.spec.js
index 44095a6c1..c51987f31 100644
--- a/test/select.spec.js
+++ b/test/select.spec.js
@@ -19,6 +19,17 @@ describe('ui-select tests', function() {
       { name: 'Nicole',    email: 'nicole@email.com',    age: 43 },
       { name: 'Adrian',    email: 'adrian@email.com',    age: 21 }
     ];
+
+    scope.names = [
+      'Adam',
+      'Amalie',
+      'Wladimir',
+      'Samantha',
+      'Estefanía',
+      'Natasha',
+      'Nicole',
+      'Adrian'
+    ];
   }));
 
 
@@ -30,15 +41,30 @@ describe('ui-select tests', function() {
     return el;
   }
 
-  function createUiSelect(attrs) {
+  function generateAttrsHtml(attrs) {
     var attrsHtml = '';
     if (attrs !== undefined) {
       if (attrs.disabled !== undefined) { attrsHtml += ' ng-disabled="' + attrs.disabled + '"'; }
       if (attrs.required !== undefined) { attrsHtml += ' ng-required="' + attrs.required + '"'; }
+      if (attrs.allowNewValues !== undefined) { attrsHtml += ' allow-new-values="' + attrs.allowNewValues + '"'; }
     }
+    return attrsHtml;
+  }
 
+  function createUiSelectCollection(attrs) {
     return compileTemplate(
-      '<ui-select ng-model="selection"' + attrsHtml + '> \
+      '<ui-select ng-model="selection"' + generateAttrsHtml(attrs) + '> \
+        <match placeholder="Pick one...">{{$select.selected}}</match> \
+        <choices repeat="name in names | filter: $select.search"> \
+          <div ng-bind-html="name | highlight: $select.search"></div> \
+        </choices> \
+      </ui-select>'
+    );
+  }
+
+  function createUiSelect(attrs) {
+    return compileTemplate(
+      '<ui-select ng-model="selection"' + generateAttrsHtml(attrs) + '> \
         <match placeholder="Pick one...">{{$select.selected.name}}</match> \
         <choices repeat="person in people | filter: $select.search"> \
           <div ng-bind-html="person.name | highlight: $select.search"></div> \
@@ -159,6 +185,15 @@ describe('ui-select tests', function() {
     clickMatch(el3);
     expect(el3.scope().$select.open).toEqual(true);
   });
+  
+  it('should allow new values if the attribute says so', function() {
+    var el = createUiSelectCollection({allowNewValues: true});
+    clickMatch(el);
+
+    $(el).scope().$select.select("I don't exist");
+
+    expect($(el).scope().$select.selected).toEqual("I don't exist");
+  });
 
   // See when an item that evaluates to false (such as "false" or "no") is selected, the placeholder is shown https://github.com/angular-ui/ui-select/pull/32
   it('should not display the placeholder when item evaluates to false', function() {