diff --git a/examples/config.c b/examples/config.c
index 954edb06..6796ea66 100644
--- a/examples/config.c
+++ b/examples/config.c
@@ -255,49 +255,14 @@ void example_config_destroy(struct example_config *config) {
 	free(config);
 }
 
-struct wlr_output_layout *configure_layout(struct example_config *config,
-		struct wl_list *outputs) {
-	struct wlr_output_layout *layout = wlr_output_layout_init();
-	int max_x = INT_MIN;
-	int max_x_y = INT_MIN; // y value for the max_x output
-
-	// first add all the configured outputs
-	struct output_state *output;
-	wl_list_for_each(output, outputs, link) {
-		struct output_config *conf;
-		wl_list_for_each(conf, &config->outputs, link) {
-			if (strcmp(conf->name, output->output->name) == 0) {
-				wlr_output_layout_add(layout, output->output,
-						conf->x, conf->y);
-				wlr_output_transform(output->output, conf->transform);
-				int width, height;
-				wlr_output_effective_resolution(output->output, &width,
-					&height);
-				if (conf->x + width > max_x) {
-					max_x = conf->x + width;
-					max_x_y = conf->y;
-				}
-				break;
-			}
-		}
-	}
-
-	if (max_x == INT_MIN) {
-		// couldn't find a configured output
-		max_x = 0;
-		max_x_y = 0;
-	}
-
-	// now add all the other configured outputs in a sensible position
-	wl_list_for_each(output, outputs, link) {
-		if (wlr_output_layout_get(layout, output->output)) {
-			continue;
+struct output_config *example_config_get_output(struct example_config *config,
+		struct wlr_output *output) {
+	struct output_config *o_config;
+	wl_list_for_each(o_config, &config->outputs, link) {
+		if (strcmp(o_config->name, output->name) == 0) {
+			return o_config;
 		}
-		wlr_output_layout_add(layout, output->output, max_x, max_x_y);
-		int width, height;
-		wlr_output_effective_resolution(output->output, &width, &height);
-		max_x += width;
 	}
 
-	return layout;
+	return NULL;
 }
diff --git a/examples/config.h b/examples/config.h
index 2a69c4f4..bc2e101b 100644
--- a/examples/config.h
+++ b/examples/config.h
@@ -34,6 +34,11 @@ struct example_config *parse_args(int argc, char *argv[]);
 
 void example_config_destroy(struct example_config *config);
 
-struct wlr_output_layout *configure_layout(struct example_config *config,
-		struct wl_list *outputs);
+/**
+ * Get configuration for the output. If the output is not configured, returns
+ * NULL.
+ */
+struct output_config *example_config_get_output(struct example_config *config,
+		struct wlr_output *output);
+
 #endif
diff --git a/examples/output-layout.c b/examples/output-layout.c
index 90ad558f..a207e9ce 100644
--- a/examples/output-layout.c
+++ b/examples/output-layout.c
@@ -129,20 +129,22 @@ static void set_main_output(struct sample_state *sample,
 	sample->y_offs = l_output->y + 200;
 }
 
-static void handle_output_resolution(struct compositor_state *state, struct output_state *output) {
-	struct sample_state *sample = state->data;
-	wlr_output_layout_destroy(sample->layout);
-	sample->layout = configure_layout(sample->config, &sample->outputs);
-	set_main_output(sample, output->output);
-
-}
+static void handle_output_add(struct output_state *ostate) {
+	struct sample_state *sample = ostate->compositor->data;
+	wl_list_insert(&sample->outputs, &ostate->link);
+
+	struct output_config *o_config =
+		example_config_get_output(sample->config, ostate->output);
+
+	if (o_config) {
+		wlr_output_transform(ostate->output, o_config->transform);
+		wlr_output_layout_add(sample->layout, ostate->output, o_config->x,
+			o_config->y);
+	} else {
+		wlr_output_layout_add_auto(sample->layout, ostate->output);
+	}
 
-static void handle_output_add(struct output_state *output) {
-	struct sample_state *sample = output->compositor->data;
-	wl_list_insert(&sample->outputs, &output->link);
-	wlr_output_layout_destroy(sample->layout);
-	sample->layout = configure_layout(sample->config, &sample->outputs);
-	set_main_output(sample, output->output);
+	set_main_output(sample, ostate->output);
 }
 
 static void update_velocities(struct compositor_state *state,
@@ -190,7 +192,6 @@ int main(int argc, char *argv[]) {
 	compositor.data = &state;
 	compositor.output_add_cb = handle_output_add;
 	compositor.output_frame_cb = handle_output_frame;
-	compositor.output_resolution_cb = handle_output_resolution;
 	compositor.keyboard_key_cb = handle_keyboard_key;
 	compositor_init(&compositor);
 
diff --git a/examples/pointer.c b/examples/pointer.c
index d9a06339..fe0e2cee 100644
--- a/examples/pointer.c
+++ b/examples/pointer.c
@@ -132,11 +132,16 @@ static void handle_output_add(struct output_state *ostate) {
 	struct wlr_output *wlr_output = ostate->output;
 	struct wlr_xcursor_image *image = sample->xcursor->images[0];
 
-	// reset layout
-	wlr_output_layout_destroy(sample->layout);
-	sample->layout =
-        configure_layout(sample->config, &ostate->compositor->outputs);
-	wlr_cursor_attach_output_layout(sample->cursor, sample->layout);
+	struct output_config *o_config =
+		example_config_get_output(sample->config, ostate->output);
+
+	if (o_config) {
+		wlr_output_transform(ostate->output, o_config->transform);
+		wlr_output_layout_add(sample->layout, ostate->output, o_config->x,
+			o_config->y);
+	} else {
+		wlr_output_layout_add_auto(sample->layout, ostate->output);
+	}
 
 	// cursor configuration
 	char *mapped_output = sample->config->cursor.mapped_output;
@@ -158,11 +163,9 @@ static void handle_output_add(struct output_state *ostate) {
 }
 
 static void handle_output_remove(struct output_state *ostate) {
-		struct sample_state *sample = ostate->compositor->data;
-	wlr_output_layout_destroy(sample->layout);
-	sample->layout =
-        configure_layout(sample->config, &ostate->compositor->outputs);
-	wlr_cursor_attach_output_layout(sample->cursor, sample->layout);
+	struct sample_state *sample = ostate->compositor->data;
+
+	wlr_output_layout_remove(sample->layout, ostate->output);
 
 	configure_devices(sample);
 
@@ -172,15 +175,6 @@ static void handle_output_remove(struct output_state *ostate) {
 	}
 }
 
-static void handle_output_resolution(struct compositor_state *state,
-		struct output_state *ostate) {
-	struct sample_state *sample = ostate->compositor->data;
-	wlr_output_layout_destroy(sample->layout);
-	sample->layout =
-        configure_layout(sample->config, &ostate->compositor->outputs);
-	wlr_cursor_attach_output_layout(sample->cursor, sample->layout);
-}
-
 static void handle_input_add(struct compositor_state *state,
         struct wlr_input_device *device) {
 	struct sample_state *sample = state->data;
@@ -341,6 +335,8 @@ int main(int argc, char *argv[]) {
 
 	state.config = parse_args(argc, argv);
 	state.cursor = wlr_cursor_create();
+	state.layout = wlr_output_layout_init();
+	wlr_cursor_attach_output_layout(state.cursor, state.layout);
 	wlr_cursor_map_to_region(state.cursor, state.config->cursor.mapped_box);
 	wl_list_init(&state.devices);
 
@@ -380,7 +376,6 @@ int main(int argc, char *argv[]) {
 	compositor.data = &state;
 	compositor.output_add_cb = handle_output_add;
 	compositor.output_remove_cb = handle_output_remove;
-	compositor.output_resolution_cb = handle_output_resolution;
 	compositor.output_frame_cb = handle_output_frame;
 	compositor.input_add_cb = handle_input_add;
 	compositor.input_remove_cb = handle_input_remove;
@@ -407,4 +402,5 @@ int main(int argc, char *argv[]) {
 	wlr_xcursor_theme_destroy(theme);
 	example_config_destroy(state.config);
 	wlr_cursor_destroy(state.cursor);
+	wlr_output_layout_destroy(state.layout);
 }
diff --git a/include/wlr/types/wlr_output_layout.h b/include/wlr/types/wlr_output_layout.h
index b1253eb1..78127f19 100644
--- a/include/wlr/types/wlr_output_layout.h
+++ b/include/wlr/types/wlr_output_layout.h
@@ -67,4 +67,15 @@ void wlr_output_layout_closest_point(struct wlr_output_layout *layout,
 struct wlr_box *wlr_output_layout_get_box(
 		struct wlr_output_layout *layout, struct wlr_output *reference);
 
+/**
+* Add an auto configured output to the layout. This will place the output in a
+* sensible location in the layout. The coordinates of the output in the layout
+* may adjust dynamically when the layout changes. If the output is already in
+* the layout, it will become auto configured. If the position of the output is
+* set such as with `wlr_output_layout_move()`, the output will become manually
+* configured.
+*/
+void wlr_output_layout_add_auto(struct wlr_output_layout *layout,
+		struct wlr_output *output);
+
 #endif
diff --git a/types/wlr_output_layout.c b/types/wlr_output_layout.c
index 7c98837d..05642d08 100644
--- a/types/wlr_output_layout.c
+++ b/types/wlr_output_layout.c
@@ -12,7 +12,10 @@ struct wlr_output_layout_state {
 };
 
 struct wlr_output_layout_output_state {
+	struct wlr_output_layout *layout;
 	struct wlr_box *_box;
+	bool auto_configured;
+	struct wl_listener resolution;
 };
 
 struct wlr_output_layout *wlr_output_layout_init() {
@@ -47,16 +50,93 @@ void wlr_output_layout_destroy(struct wlr_output_layout *layout) {
 	free(layout);
 }
 
-void wlr_output_layout_add(struct wlr_output_layout *layout,
-		struct wlr_output *output, int x, int y) {
+static struct wlr_box *wlr_output_layout_output_get_box(
+		struct wlr_output_layout_output *l_output) {
+		l_output->state->_box->x = l_output->x;
+		l_output->state->_box->y = l_output->y;
+		int width, height;
+		wlr_output_effective_resolution(l_output->output, &width, &height);
+		l_output->state->_box->width = width;
+		l_output->state->_box->height = height;
+		return l_output->state->_box;
+}
+
+/**
+ * This must be called whenever the layout changes to reconfigure the auto
+ * configured outputs.
+ *
+ * Auto configured outputs are placed to the right of the north east corner of
+ * the rightmost output in the layout in a horizontal line.
+ */
+static void wlr_output_layout_reconfigure(struct wlr_output_layout *layout) {
+	int max_x = INT_MIN;
+	int max_x_y = INT_MIN; // y value for the max_x output
+
+	// find the rightmost x coordinate occupied by a manually configured output
+	// in the layout
+	struct wlr_output_layout_output *l_output;
+	wl_list_for_each(l_output, &layout->outputs, link) {
+		if (l_output->state->auto_configured) {
+			continue;
+		}
+
+		struct wlr_box *box = wlr_output_layout_output_get_box(l_output);
+		if (box->x + box->width > max_x) {
+			max_x = box->x + box->width;
+			max_x_y = box->y;
+		}
+	}
+
+	if (max_x == INT_MIN) {
+		// there are no manually configured outputs
+		max_x = 0;
+		max_x_y = 0;
+	}
+
+	wl_list_for_each(l_output, &layout->outputs, link) {
+		if (!l_output->state->auto_configured) {
+			continue;
+		}
+		struct wlr_box *box = wlr_output_layout_output_get_box(l_output);
+		l_output->x = max_x;
+		l_output->y = max_x_y;
+		max_x += box->width;
+	}
+}
+
+static void handle_output_resolution(struct wl_listener *listener, void *data) {
+	struct wlr_output_layout_output_state *state =
+		wl_container_of(listener, state, resolution);
+	wlr_output_layout_reconfigure(state->layout);
+}
+
+static struct wlr_output_layout_output *wlr_output_layout_output_create(
+		struct wlr_output_layout *layout, struct wlr_output *output) {
 	struct wlr_output_layout_output *l_output;
 	l_output= calloc(1, sizeof(struct wlr_output_layout_output));
 	l_output->state = calloc(1, sizeof(struct wlr_output_layout_output_state));
 	l_output->state->_box = calloc(1, sizeof(struct wlr_box));
+	l_output->state->layout = layout;
 	l_output->output = output;
+	wl_list_insert(&layout->outputs, &l_output->link);
+
+	wl_signal_add(&output->events.resolution, &l_output->state->resolution);
+	l_output->state->resolution.notify = handle_output_resolution;
+
+	return l_output;
+}
+
+void wlr_output_layout_add(struct wlr_output_layout *layout,
+		struct wlr_output *output, int x, int y) {
+	struct wlr_output_layout_output *l_output =
+		wlr_output_layout_get(layout, output);
+	if (!l_output) {
+		l_output = wlr_output_layout_output_create(layout, output);
+	}
 	l_output->x = x;
 	l_output->y = y;
-	wl_list_insert(&layout->outputs, &l_output->link);
+	l_output->state->auto_configured = false;
+	wlr_output_layout_reconfigure(layout);
 }
 
 struct wlr_output_layout_output *wlr_output_layout_get(
@@ -130,6 +210,10 @@ void wlr_output_layout_move(struct wlr_output_layout *layout,
 	if (l_output) {
 		l_output->x = x;
 		l_output->y = y;
+		l_output->state->auto_configured = false;
+		wlr_output_layout_reconfigure(layout);
+	} else {
+		wlr_log(L_ERROR, "output not found in this layout: %s", output->name);
 	}
 }
 
@@ -139,6 +223,7 @@ void wlr_output_layout_remove(struct wlr_output_layout *layout,
 	l_output= wlr_output_layout_get(layout, output);
 	if (l_output) {
 		wlr_output_layout_output_destroy(l_output);
+		wlr_output_layout_reconfigure(layout);
 	}
 }
 
@@ -158,15 +243,6 @@ void wlr_output_layout_output_coords(struct wlr_output_layout *layout,
 	}
 }
 
-static struct wlr_box *wlr_output_layout_output_get_box(
-		struct wlr_output_layout_output *l_output) {
-		l_output->state->_box->x = l_output->x;
-		l_output->state->_box->y = l_output->y;
-		wlr_output_effective_resolution(l_output->output,
-			&l_output->state->_box->width, &l_output->state->_box->height);
-		return l_output->state->_box;
-}
-
 void wlr_output_layout_closest_point(struct wlr_output_layout *layout,
 		struct wlr_output *reference, double x, double y, double *dest_x,
 		double *dest_y) {
@@ -234,3 +310,16 @@ struct wlr_box *wlr_output_layout_get_box(
 
 	// not reached
 }
+
+void wlr_output_layout_add_auto(struct wlr_output_layout *layout,
+		struct wlr_output *output) {
+	struct wlr_output_layout_output *l_output =
+		wlr_output_layout_get(layout, output);
+
+	if (!l_output) {
+		l_output = wlr_output_layout_output_create(layout, output);
+	}
+
+	l_output->state->auto_configured = true;
+	wlr_output_layout_reconfigure(layout);
+}