diff --git a/lib/java/com/google/android/material/tabs/ElasticTabIndicatorInterpolator.java b/lib/java/com/google/android/material/tabs/ElasticTabIndicatorInterpolator.java
index 499f52cd840..e43f8d5b8c1 100644
--- a/lib/java/com/google/android/material/tabs/ElasticTabIndicatorInterpolator.java
+++ b/lib/java/com/google/android/material/tabs/ElasticTabIndicatorInterpolator.java
@@ -44,7 +44,7 @@ private static float accInterp(@FloatRange(from = 0.0, to = 1.0) float fraction)
   }
 
   @Override
-  void setIndicatorBoundsForOffset(
+  void updateIndicatorForOffset(
       TabLayout tabLayout,
       View startTitle,
       View endTitle,
diff --git a/lib/java/com/google/android/material/tabs/FadeTabIndicatorInterpolator.java b/lib/java/com/google/android/material/tabs/FadeTabIndicatorInterpolator.java
new file mode 100644
index 00000000000..ba0d45ad406
--- /dev/null
+++ b/lib/java/com/google/android/material/tabs/FadeTabIndicatorInterpolator.java
@@ -0,0 +1,57 @@
+/*
+ * Copyright (C) 2021 The Android Open Source Project
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ *      http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+
+package com.google.android.material.tabs;
+
+import static com.google.android.material.animation.AnimationUtils.lerp;
+
+import android.graphics.RectF;
+import android.graphics.drawable.Drawable;
+import android.view.View;
+import androidx.annotation.NonNull;
+
+/**
+ * An implementation of {@link TabIndicatorInterpolator} that sequentially fades out the selected
+ * tab indicator from the current destination and fades it back in at its new destination.
+ */
+class FadeTabIndicatorInterpolator extends TabIndicatorInterpolator {
+
+  // When the indicator will disappear from the current tab and begin to reappear at the newly
+  // selected tab.
+  private static final float FADE_THRESHOLD = 0.5F;
+
+  @Override
+  void updateIndicatorForOffset(
+      TabLayout tabLayout,
+      View startTitle,
+      View endTitle,
+      float offset,
+      @NonNull Drawable indicator) {
+    View tab = offset < FADE_THRESHOLD ? startTitle : endTitle;
+    RectF bounds = calculateIndicatorWidthForTab(tabLayout, tab);
+    float alpha = offset < FADE_THRESHOLD
+        ? lerp(1F, 0F, 0F, FADE_THRESHOLD, offset)
+        : lerp(0F, 1F, FADE_THRESHOLD, 1F, offset);
+
+    indicator.setBounds(
+        (int) bounds.left,
+        indicator.getBounds().top,
+        (int) bounds.right,
+        indicator.getBounds().bottom
+    );
+    indicator.setAlpha((int) (alpha * 255F));
+  }
+}
diff --git a/lib/java/com/google/android/material/tabs/TabIndicatorInterpolator.java b/lib/java/com/google/android/material/tabs/TabIndicatorInterpolator.java
index 5e7bb10c4e8..52167a768a4 100644
--- a/lib/java/com/google/android/material/tabs/TabIndicatorInterpolator.java
+++ b/lib/java/com/google/android/material/tabs/TabIndicatorInterpolator.java
@@ -37,9 +37,9 @@
  * TabLayout#isTabIndicatorFullWidth()} and linearly move the indicator between tabs.
  *
  * <p>Subclasses can override {@link #setIndicatorBoundsForTab(TabLayout, View, Drawable)} and
- * {@link #setIndicatorBoundsForOffset(TabLayout, View, View, float, Drawable)} (TabLayout, View,
- * View, float, Drawable)} to define how the indicator should be drawn for a single tab or at any
- * point between two tabs.
+ * {@link #updateIndicatorForOffset(TabLayout, View, View, float, Drawable)} (TabLayout, View, View,
+ * float, Drawable)} to define how the indicator should be drawn for a single tab or at any point
+ * between two tabs.
  *
  * <p>Additionally, subclasses can use the provided helpers {@link
  * #calculateIndicatorWidthForTab(TabLayout, View)} and {@link
@@ -152,7 +152,7 @@ void setIndicatorBoundsForTab(TabLayout tabLayout, View tab, @NonNull Drawable i
    * @param indicator The drawable to be drawn to indicate the selected tab. Update the drawable's
    *     bounds, color, etc as {@code offset} changes to show the indicator in the correct position.
    */
-  void setIndicatorBoundsForOffset(
+  void updateIndicatorForOffset(
       TabLayout tabLayout,
       View startTitle,
       View endTitle,
diff --git a/lib/java/com/google/android/material/tabs/TabLayout.java b/lib/java/com/google/android/material/tabs/TabLayout.java
index c8c1e18b900..3d027db578a 100644
--- a/lib/java/com/google/android/material/tabs/TabLayout.java
+++ b/lib/java/com/google/android/material/tabs/TabLayout.java
@@ -383,9 +383,23 @@ public class TabLayout extends HorizontalScrollView {
    */
   public static final int INDICATOR_ANIMATION_MODE_ELASTIC = 1;
 
+  /**
+   * Indicator animation mode used to switch the selected tab indicator from one tab to another
+   * by sequentially fading it out from the current destination and in at its new destination.
+   *
+   * @see #setTabIndicatorAnimationMode(int)
+   * @see #getTabIndicatorAnimationMode()
+   * @attr ref com.google.android.material.R.styleable#TabLayout_tabIndicatorAnimationMode
+   */
+  public static final int INDICATOR_ANIMATION_MODE_FADE = 2;
+
   /** @hide */
   @RestrictTo(LIBRARY_GROUP)
-  @IntDef(value = {INDICATOR_ANIMATION_MODE_LINEAR, INDICATOR_ANIMATION_MODE_ELASTIC})
+  @IntDef(value = {
+      INDICATOR_ANIMATION_MODE_LINEAR,
+      INDICATOR_ANIMATION_MODE_ELASTIC,
+      INDICATOR_ANIMATION_MODE_FADE
+  })
   @Retention(RetentionPolicy.SOURCE)
   public @interface TabIndicatorAnimationMode {}
 
@@ -1071,6 +1085,9 @@ public void setTabIndicatorAnimationMode(
       case INDICATOR_ANIMATION_MODE_ELASTIC:
         this.tabIndicatorInterpolator = new ElasticTabIndicatorInterpolator();
         break;
+      case INDICATOR_ANIMATION_MODE_FADE:
+        this.tabIndicatorInterpolator = new FadeTabIndicatorInterpolator();
+        break;
       default:
         throw new IllegalArgumentException(
             tabIndicatorAnimationMode + " is not a valid TabIndicatorAnimationMode");
@@ -3136,7 +3153,7 @@ private void jumpIndicatorToSelectedPosition() {
     private void tweenIndicatorPosition(View startTitle, View endTitle, float fraction) {
       boolean hasVisibleTitle = startTitle != null && startTitle.getWidth() > 0;
       if (hasVisibleTitle) {
-        tabIndicatorInterpolator.setIndicatorBoundsForOffset(
+        tabIndicatorInterpolator.updateIndicatorForOffset(
             TabLayout.this, startTitle, endTitle, fraction, tabSelectedIndicator);
       } else {
         // Hide the indicator by setting the drawable's width to 0 and off screen.
diff --git a/lib/java/com/google/android/material/tabs/res/values/attrs.xml b/lib/java/com/google/android/material/tabs/res/values/attrs.xml
index 03505b85a1c..e3621918a1a 100644
--- a/lib/java/com/google/android/material/tabs/res/values/attrs.xml
+++ b/lib/java/com/google/android/material/tabs/res/values/attrs.xml
@@ -66,6 +66,10 @@
            This causes the indicator to look like it stretches between destinations
            an then shrinks back down to fit the size of it's target tab. -->
       <enum name="elastic" value="1"/>
+      <!-- Animate the selection indicator by sequentially fading it out from
+           its current destination and then fading it in at its new
+           destination. -->
+      <enum name="fade" value="2"/>
     </attr>
     <!-- The behavior mode for the Tabs in this layout -->
     <attr name="tabMode">