diff --git a/CHANGELOG.md b/CHANGELOG.md
index 4258bd8ec5..d3166fc0c1 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -20,6 +20,7 @@ This project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0.htm
 ### BREAKING CHANGES
 - Use regular components instead of `Label` in `RadioGroupItem` @layershifter ([#1070](https://github.com/stardust-ui/react/pull/1070))
 - Remove `Flex.Gap` component, and convert the `gap` styles to `margins` on the child elements of the `Flex` component @mnajdova ([#1074](https://github.com/stardust-ui/react/pull/1074))
+- Dropdown: control highlightedIndex from Dropdown @silviuavram ([#966](https://github.com/stardust-ui/react/pull/966))
 
 ### Fixes
 - Add aria posinset and setsize, hide menu indicator from narration @jurokapsiar ([#1066](https://github.com/stardust-ui/react/pull/1066))
diff --git a/build/gulp/tasks/test-projects/rollup/rollup.config.js b/build/gulp/tasks/test-projects/rollup/rollup.config.js
index c8b56ba550..830cf3496c 100644
--- a/build/gulp/tasks/test-projects/rollup/rollup.config.js
+++ b/build/gulp/tasks/test-projects/rollup/rollup.config.js
@@ -45,6 +45,8 @@ export default {
           'ArrowUp',
           'ArrowLeft',
           'ArrowRight',
+          'Backspace',
+          'Delete',
           'End',
           'Enter',
           'Escape',
diff --git a/packages/react/package.json b/packages/react/package.json
index 3355f03056..9957e15bcc 100644
--- a/packages/react/package.json
+++ b/packages/react/package.json
@@ -7,7 +7,7 @@
   "dependencies": {
     "@stardust-ui/react-proptypes": "^0.23.1",
     "classnames": "^2.2.5",
-    "downshift": "^3.2.0",
+    "downshift": "^3.2.6",
     "fela": "^10.2.0",
     "fela-plugin-fallback-value": "^10.2.0",
     "fela-plugin-placeholder-prefixer": "^10.2.0",
diff --git a/packages/react/src/components/Dropdown/Dropdown.tsx b/packages/react/src/components/Dropdown/Dropdown.tsx
index ec679cffac..ddafcfab04 100644
--- a/packages/react/src/components/Dropdown/Dropdown.tsx
+++ b/packages/react/src/components/Dropdown/Dropdown.tsx
@@ -2,6 +2,7 @@ import * as React from 'react'
 import * as PropTypes from 'prop-types'
 import * as _ from 'lodash'
 import cx from 'classnames'
+import * as keyboardKey from 'keyboard-key'
 
 import {
   Extendable,
@@ -29,7 +30,6 @@ import {
   handleRef,
   UIComponentProps,
 } from '../../lib'
-import keyboardKey from 'keyboard-key'
 import Indicator, { IndicatorProps } from '../Indicator/Indicator'
 import List from '../List/List'
 import Ref from '../Ref/Ref'
@@ -67,6 +67,9 @@ export interface DropdownProps extends UIComponentProps<DropdownProps, DropdownS
   /** Initial value for 'open' in uncontrolled mode */
   defaultOpen?: boolean
 
+  /** The initial value for the index of the list item to be highlighted. */
+  defaultHighlightedIndex?: number
+
   /** The initial value for the search query, if the dropdown is also a search. */
   defaultSearchQuery?: string
 
@@ -96,6 +99,12 @@ export interface DropdownProps extends UIComponentProps<DropdownProps, DropdownS
    */
   getA11yStatusMessage?: (options: DownshiftA11yStatusMessageOptions<ShorthandValue>) => string
 
+  /** A dropdown can open with the first option already highlighted. */
+  highlightFirstItemOnOpen?: boolean
+
+  /** The index of the list item to be highlighted. */
+  highlightedIndex?: number
+
   /** A dropdown can be formatted to appear inline in the content of other components. */
   inline?: boolean
 
@@ -187,12 +196,12 @@ export interface DropdownProps extends UIComponentProps<DropdownProps, DropdownS
 }
 
 export interface DropdownState {
-  activeSelectedIndex: number
   a11ySelectionStatus: string
-  defaultHighlightedIndex: number
+  activeSelectedIndex: number
   focused: boolean
   open: boolean
   searchQuery: string
+  highlightedIndex: number
   value: ShorthandValue | ShorthandCollection
 }
 
@@ -225,6 +234,7 @@ class Dropdown extends AutoControlledComponent<Extendable<DropdownProps>, Dropdo
     clearIndicator: customPropTypes.itemShorthand,
     defaultActiveSelectedIndex: PropTypes.number,
     defaultOpen: PropTypes.bool,
+    defaultHighlightedIndex: PropTypes.number,
     defaultSearchQuery: PropTypes.string,
     defaultValue: PropTypes.oneOfType([
       customPropTypes.itemShorthand,
@@ -233,6 +243,8 @@ class Dropdown extends AutoControlledComponent<Extendable<DropdownProps>, Dropdo
     fluid: PropTypes.bool,
     getA11ySelectionMessage: PropTypes.object,
     getA11yStatusMessage: PropTypes.func,
+    highlightFirstItemOnOpen: PropTypes.bool,
+    highlightedIndex: PropTypes.number,
     inline: PropTypes.bool,
     items: customPropTypes.collectionShorthand,
     itemToString: PropTypes.func,
@@ -273,7 +285,13 @@ class Dropdown extends AutoControlledComponent<Extendable<DropdownProps>, Dropdo
     triggerButton: {},
   }
 
-  static autoControlledProps = ['activeSelectedIndex', 'open', 'searchQuery', 'value']
+  static autoControlledProps = [
+    'activeSelectedIndex',
+    'highlightedIndex',
+    'open',
+    'searchQuery',
+    'value',
+  ]
 
   static Item = DropdownItem
   static SearchInput = DropdownSearchInput
@@ -281,12 +299,11 @@ class Dropdown extends AutoControlledComponent<Extendable<DropdownProps>, Dropdo
 
   getInitialAutoControlledState({ multiple, search }: DropdownProps): DropdownState {
     return {
-      activeSelectedIndex: multiple ? null : undefined,
       a11ySelectionStatus: '',
-      // used on single selection to open the dropdown with the selected option as highlighted.
-      defaultHighlightedIndex: this.props.multiple ? undefined : null,
+      activeSelectedIndex: multiple ? null : undefined,
       focused: false,
       open: false,
+      highlightedIndex: this.props.highlightFirstItemOnOpen ? 0 : null,
       searchQuery: search ? '' : undefined,
       value: multiple ? [] : null,
     }
@@ -309,7 +326,7 @@ class Dropdown extends AutoControlledComponent<Extendable<DropdownProps>, Dropdo
       itemToString,
       toggleIndicator,
     } = this.props
-    const { defaultHighlightedIndex, open, searchQuery, value } = this.state
+    const { highlightedIndex, open, searchQuery, value } = this.state
 
     return (
       <ElementType className={classes.root} {...unhandledProps}>
@@ -322,7 +339,7 @@ class Dropdown extends AutoControlledComponent<Extendable<DropdownProps>, Dropdo
           itemToString={itemToString}
           selectedItem={null}
           getA11yStatusMessage={getA11yStatusMessage}
-          defaultHighlightedIndex={defaultHighlightedIndex}
+          highlightedIndex={highlightedIndex}
           onStateChange={this.handleStateChange}
         >
           {({
@@ -632,11 +649,25 @@ class Dropdown extends AutoControlledComponent<Extendable<DropdownProps>, Dropdo
 
   private handleStateChange = (changes: StateChangeOptions<ShorthandValue>) => {
     if (changes.isOpen !== undefined && changes.isOpen !== this.state.open) {
-      this.trySetStateAndInvokeHandler('onOpenChange', null, { open: changes.isOpen })
+      const newState = { open: changes.isOpen, highlightedIndex: this.state.highlightedIndex }
+
+      if (changes.isOpen) {
+        const highlightedIndexOnArrowKeyOpen = this.getHighlightedIndexOnArrowKeyOpen(changes)
+        if (_.isNumber(highlightedIndexOnArrowKeyOpen)) {
+          newState.highlightedIndex = highlightedIndexOnArrowKeyOpen
+        }
+        if (!this.props.search) {
+          this.listRef.current.focus()
+        }
+      } else {
+        newState.highlightedIndex = this.getHighlightedIndexOnClose()
+      }
+
+      this.trySetStateAndInvokeHandler('onOpenChange', null, newState)
     }
 
-    if (changes.isOpen && !this.props.search) {
-      this.listRef.current.focus()
+    if (this.state.open && _.isNumber(changes.highlightedIndex)) {
+      this.trySetState({ highlightedIndex: changes.highlightedIndex })
     }
   }
 
@@ -803,7 +834,7 @@ class Dropdown extends AutoControlledComponent<Extendable<DropdownProps>, Dropdo
   private handleClear = (e: React.SyntheticEvent<HTMLElement>) => {
     const {
       activeSelectedIndex,
-      defaultHighlightedIndex,
+      highlightedIndex,
       searchQuery,
       value,
     } = this.getInitialAutoControlledState(this.props)
@@ -811,13 +842,12 @@ class Dropdown extends AutoControlledComponent<Extendable<DropdownProps>, Dropdo
     _.invoke(this.props, 'onSelectedChange', e, {
       ...this.props,
       activeSelectedIndex,
-      defaultHighlightedIndex,
+      highlightedIndex,
       searchQuery,
       value,
     })
 
-    this.trySetState({ activeSelectedIndex, searchQuery, value })
-    this.setState({ defaultHighlightedIndex })
+    this.trySetState({ activeSelectedIndex, highlightedIndex, searchQuery, value })
 
     this.tryFocusSearchInput()
     this.tryFocusTriggerButton()
@@ -878,7 +908,7 @@ class Dropdown extends AutoControlledComponent<Extendable<DropdownProps>, Dropdo
     })
 
     if (!multiple) {
-      this.setState({ defaultHighlightedIndex: items.indexOf(item) })
+      this.setState({ highlightedIndex: items.indexOf(item) })
     }
 
     if (getA11ySelectionMessage && getA11ySelectionMessage.onAdd) {
@@ -1021,6 +1051,48 @@ class Dropdown extends AutoControlledComponent<Extendable<DropdownProps>, Dropdo
   private isValueEmpty = (value: ShorthandValue | ShorthandCollection) => {
     return _.isArray(value) ? value.length < 1 : !value
   }
+
+  private getHighlightedIndexOnArrowKeyOpen = (
+    changes: StateChangeOptions<ShorthandValue>,
+  ): number => {
+    const itemsLength = this.getItemsFilteredBySearchQuery().length
+    switch (changes.type) {
+      // if open by ArrowUp, index should change by -1.
+      case Downshift.stateChangeTypes.keyDownArrowUp:
+        if (_.isNumber(this.state.highlightedIndex)) {
+          const newIndex = this.state.highlightedIndex - 1
+          return newIndex < 0 ? itemsLength - 1 : newIndex
+        }
+        return itemsLength - 1
+      // if open by ArrowDown, index should change by +1.
+      case Downshift.stateChangeTypes.keyDownArrowDown:
+        if (_.isNumber(this.state.highlightedIndex)) {
+          const newIndex = this.state.highlightedIndex + 1
+          return newIndex >= itemsLength ? 0 : newIndex
+        }
+        return 0
+      default:
+        return undefined
+    }
+  }
+
+  private getHighlightedIndexOnClose = (): number => {
+    const { highlightFirstItemOnOpen, items, multiple, search } = this.props
+    const { value } = this.state
+
+    if (!multiple && !search && value) {
+      // in single selection, if there is a selected item, highlight it.
+      return items.indexOf(value)
+    }
+
+    if (highlightFirstItemOnOpen) {
+      // otherwise, if highlightFirstItemOnOpen prop is provied, highlight first item.
+      return 0
+    }
+
+    // otherwise, highlight no item.
+    return null
+  }
 }
 
 Dropdown.slotClassNames = {
diff --git a/packages/react/test/specs/components/Dropdown/Dropdown-test.tsx b/packages/react/test/specs/components/Dropdown/Dropdown-test.tsx
index 00bf46f601..3f9b302836 100644
--- a/packages/react/test/specs/components/Dropdown/Dropdown-test.tsx
+++ b/packages/react/test/specs/components/Dropdown/Dropdown-test.tsx
@@ -1,24 +1,21 @@
-import * as faker from 'faker'
 import * as React from 'react'
+import * as keyboardKey from 'keyboard-key'
 
 import Dropdown from 'src/components/Dropdown/Dropdown'
 import { isConformant } from 'test/specs/commonTests'
 import { mountWithProvider } from 'test/utils'
 
+jest.dontMock('keyboard-key')
+
 describe('Dropdown', () => {
+  const items = ['item1', 'item2', 'item3']
   isConformant(Dropdown, { hasAccessibilityProp: false })
 
   describe('clearable', () => {
     it('calls onChange on Icon click with an `empty` value', () => {
       const onSelectedChange = jest.fn()
-      const options = [faker.lorem.word(), faker.lorem.word(), faker.lorem.word()]
       const wrapper = mountWithProvider(
-        <Dropdown
-          clearable
-          onSelectedChange={onSelectedChange}
-          options={options}
-          value={options[0]}
-        />,
+        <Dropdown clearable onSelectedChange={onSelectedChange} items={items} value={items[0]} />,
       )
 
       wrapper.find({ className: Dropdown.slotClassNames.clearIndicator }).simulate('click')
@@ -27,7 +24,7 @@ describe('Dropdown', () => {
         expect.objectContaining({ type: 'click' }),
         expect.objectContaining({
           activeSelectedIndex: undefined,
-          defaultHighlightedIndex: null,
+          highlightedIndex: null,
           searchQuery: undefined,
           value: null,
         }),
@@ -35,6 +32,158 @@ describe('Dropdown', () => {
     })
   })
 
+  describe('highlightedIndex', () => {
+    const onOpenChange = jest.fn()
+
+    afterEach(() => {
+      onOpenChange.mockReset()
+    })
+
+    it('calls onOpen with highlightedIndex on click', () => {
+      const highlightedIndex = 1
+      const wrapper = mountWithProvider(
+        <Dropdown highlightedIndex={highlightedIndex} onOpenChange={onOpenChange} items={items} />,
+      )
+
+      wrapper.find({ className: Dropdown.slotClassNames.triggerButton }).simulate('click')
+      expect(onOpenChange).toBeCalledTimes(1)
+      expect(onOpenChange).toHaveBeenCalledWith(
+        null,
+        expect.objectContaining({
+          highlightedIndex,
+          open: true,
+        }),
+      )
+    })
+
+    it('calls onOpen with highlightedIndex + 1 on arrow down', () => {
+      const highlightedIndex = 1
+      const wrapper = mountWithProvider(
+        <Dropdown highlightedIndex={highlightedIndex} onOpenChange={onOpenChange} items={items} />,
+      )
+
+      wrapper
+        .find({ className: Dropdown.slotClassNames.triggerButton })
+        .simulate('focus')
+        .simulate('keydown', { keyCode: keyboardKey.ArrowDown, key: 'ArrowDown' })
+      expect(onOpenChange).toBeCalledTimes(1)
+      expect(onOpenChange).toHaveBeenCalledWith(
+        null,
+        expect.objectContaining({
+          highlightedIndex: highlightedIndex + 1,
+          open: true,
+        }),
+      )
+    })
+
+    it('calls onOpen with highlightedIndex - 1 on arrow down', () => {
+      const highlightedIndex = 1
+      const wrapper = mountWithProvider(
+        <Dropdown highlightedIndex={highlightedIndex} onOpenChange={onOpenChange} items={items} />,
+      )
+
+      wrapper
+        .find({ className: Dropdown.slotClassNames.triggerButton })
+        .simulate('focus')
+        .simulate('keydown', { keyCode: keyboardKey.ArrowUp, key: 'ArrowUp' })
+      expect(onOpenChange).toBeCalledTimes(1)
+      expect(onOpenChange).toHaveBeenCalledWith(
+        null,
+        expect.objectContaining({
+          highlightedIndex: highlightedIndex - 1,
+          open: true,
+        }),
+      )
+    })
+
+    it('calls onOpen with highlightedIndex wrapped to 0 on arrow down', () => {
+      const highlightedIndex = items.length - 1
+      const wrapper = mountWithProvider(
+        <Dropdown highlightedIndex={highlightedIndex} onOpenChange={onOpenChange} items={items} />,
+      )
+
+      wrapper
+        .find({ className: Dropdown.slotClassNames.triggerButton })
+        .simulate('focus')
+        .simulate('keydown', { keyCode: keyboardKey.ArrowDown, key: 'ArrowDown' })
+      expect(onOpenChange).toBeCalledTimes(1)
+      expect(onOpenChange).toHaveBeenCalledWith(
+        null,
+        expect.objectContaining({
+          highlightedIndex: 0,
+          open: true,
+        }),
+      )
+    })
+
+    it('calls onOpen with highlightedIndex wrapped to items.length - 1 on arrow up', () => {
+      const highlightedIndex = 0
+      const wrapper = mountWithProvider(
+        <Dropdown highlightedIndex={highlightedIndex} onOpenChange={onOpenChange} items={items} />,
+      )
+
+      wrapper
+        .find({ className: Dropdown.slotClassNames.triggerButton })
+        .simulate('focus')
+        .simulate('keydown', { keyCode: keyboardKey.ArrowUp, key: 'ArrowUp' })
+      expect(onOpenChange).toBeCalledTimes(1)
+      expect(onOpenChange).toHaveBeenCalledWith(
+        null,
+        expect.objectContaining({
+          highlightedIndex: items.length - 1,
+          open: true,
+        }),
+      )
+    })
+
+    it('calls onOpen with highlightedIndex set to defaultHighlightedIndex', () => {
+      const defaultHighlightedIndex = 1
+      const wrapper = mountWithProvider(
+        <Dropdown
+          defaultHighlightedIndex={defaultHighlightedIndex}
+          onOpenChange={onOpenChange}
+          items={items}
+        />,
+      )
+
+      wrapper.find({ className: Dropdown.slotClassNames.triggerButton }).simulate('click')
+      expect(onOpenChange).toBeCalledTimes(1)
+      expect(onOpenChange).toHaveBeenCalledWith(
+        null,
+        expect.objectContaining({
+          highlightedIndex: defaultHighlightedIndex,
+          open: true,
+        }),
+      )
+    })
+
+    it('calls onOpen with highlightedIndex always set to 0', () => {
+      const wrapper = mountWithProvider(
+        <Dropdown highlightFirstItemOnOpen={true} onOpenChange={onOpenChange} items={items} />,
+      )
+      const triggerButton = wrapper.find({ className: Dropdown.slotClassNames.triggerButton })
+
+      triggerButton.simulate('click')
+      expect(onOpenChange).toBeCalledTimes(1)
+      expect(onOpenChange).toHaveBeenCalledWith(
+        null,
+        expect.objectContaining({
+          highlightedIndex: 0,
+          open: true,
+        }),
+      )
+      triggerButton.simulate('click').simulate('click')
+      expect(onOpenChange).toBeCalledTimes(3)
+      expect(onOpenChange).toHaveBeenCalledWith(
+        null,
+        expect.objectContaining({
+          highlightedIndex: 0,
+          open: true,
+        }),
+      )
+    })
+  })
+
   describe('getA11ySelectionMessage', () => {
     it('creates message container element', () => {
       mountWithProvider(<Dropdown options={[]} getA11ySelectionMessage={{}} />)
diff --git a/yarn.lock b/yarn.lock
index ce27581ab4..2cd7967b03 100644
--- a/yarn.lock
+++ b/yarn.lock
@@ -4039,10 +4039,10 @@ dot-prop@^4.1.0, dot-prop@^4.2.0:
   dependencies:
     is-obj "^1.0.0"
 
-downshift@^3.2.0:
-  version "3.2.0"
-  resolved "https://registry.yarnpkg.com/downshift/-/downshift-3.2.0.tgz#820f40575683d3fc521a9ffd409ef4a69cef531d"
-  integrity sha512-IXZ3IB7xU51R04olRGSp8GBmJhPlCL8tW5FjZrJh8e4kB4BGUWsQHZ9tNsO+qNLABieR5DIgYBZ9MncPlwZSDg==
+downshift@^3.2.6:
+  version "3.2.6"
+  resolved "https://registry.yarnpkg.com/downshift/-/downshift-3.2.6.tgz#dee518a17dfe28ab9ab38fc8261d06ee87cd4589"
+  integrity sha512-g9K3W7D5yS9gnJhPFzfGcABs/Fb01+TON+Eks4gJf3Q+3CnJNzWl+oJeJOiKzB8EnHhttZSy3RhTRgKRzG/Tqg==
   dependencies:
     "@babel/runtime" "^7.1.2"
     compute-scroll-into-view "^1.0.9"