So, I fixed this. But it revealed what I believe to be an error in Autocomplete.

First... specifically to your issue, you can eliminate the MUI Error by adding a defaultValue to the <Controller>. But that was only the beginning of another round or problems.

The problem is that functions for getOptionLabel, getOptionSelected, and onChange are sometimes passed the value (i.e. the _id in this case) and sometimes passed the option structure - as you would expect.

Here's the code I finally came up with:

import React from "react";
import { useForm, Controller } from "react-hook-form";
import { TextField } from "@material-ui/core";
import { Autocomplete } from "@material-ui/lab";
import { Button } from "@material-ui/core";
export default function FormTwo({ options }) {
  const { register, handleSubmit, control } = useForm();

  const getOpObj = option => {
    if (!option._id) option = options.find(op => op._id === option);
    return option;
  };

  return (
    <form onSubmit={handleSubmit(data => console.log(data))}>
      <Controller
        name="country"
        as={
          <Autocomplete
            options={options}
            getOptionLabel={option => getOpObj(option).name}
            getOptionSelected={(option, value) => {
              return option._id === getOpObj(value)._id;
            }}
            renderInput={params => <TextField {...params} label="Country" />}
          />
        }
        onChange={([, obj]) => getOpObj(obj)._id}
        control={control}
        defaultValue={options[0]}
      />
      <Button type="submit">Submit</Button>
    </form>
  );
}

The accepted answer (probably) works for the bugged version of Autocomplete. I think the bug was fixed some time after that, so that the solution can be slightly simplified.

This is very useful reference/codesandbox when working with react-hook-form and material-ui: https://codesandbox.io/s/react-hook-form-controller-601-j2df5?

From the above link, I modified the Autocomplete example:

import TextField from '@material-ui/core/TextField';
import Autocomplete from '@material-ui/lab/Autocomplete';


const ControlledAutocomplete = ({ options = [], renderInput, getOptionLabel, onChange: ignored, control, defaultValue, name, renderOption }) => {
  return (
    <Controller
      render={({ onChange, ...props }) => (
        <Autocomplete
          options={options}
          getOptionLabel={getOptionLabel}
          renderOption={renderOption}
          renderInput={renderInput}
          onChange={(e, data) => onChange(data)}
          {...props}
        />
      )}
      onChange={([, data]) => data}
      defaultValue={defaultValue}
      name={name}
      control={control}
    />
  );
}

With the usage:

<ControlledAutocomplete
    control={control}
    name="inputName"
    options={[{ name: 'test' }]}
    getOptionLabel={(option) => `Option: ${option.name}`}
    renderInput={(params) => <TextField {...params} label="My label" margin="normal" />}
    defaultValue={null}
/>

control is from the return value of useForm(}

Note that I'm passing null as defaultValue as in my case this input is not required. If you'll leave defaultValue you might get some errors from material-ui library.

UPDATE:

Per Steve question in the comments, this is how I'm rendering the input, so that it checks for errors:

renderInput={(params) => (
                  <TextField
                    {...params}
                    label="Field Label"
                    margin="normal"
                    error={errors[fieldName]}
                  />
                )}

Where errors is an object from react-hook-form's formMethods:

const { control, watch, errors, handleSubmit } = formMethods

Instead of using controller, with the help of register, setValue of useForm and value, onChange of Autocomplete we can achieve the same result.

const [selectedCaste, setSelectedCaste] = useState([]);
const {register, errors, setValue} = useForm();

useEffect(() => {
  register("caste");
}, [register]);

return (
                <Autocomplete
                  multiple
                  options={casteList}
                  disableCloseOnSelect
                  value={selectedCaste}
                  onChange={(_, values) => {
                    setSelectedCaste([...values]);
                    setValue("caste", [...values]);
                  }}
                  getOptionLabel={(option) => option}
                  renderOption={(option, { selected }) => (
                    <React.Fragment>
                      <Checkbox
                        icon={icon}
                        checkedIcon={checkedIcon}
                        style={{ marginRight: 8 }}
                        checked={selected}
                      />
                      {option}
                    </React.Fragment>
                  )}
                  style={{ width: "100%" }}
                  renderInput={(params) => (
                    <TextField
                      {...params}
                      id="caste"
                      error={!!errors.caste}
                      helperText={errors.caste?.message}
                      variant="outlined"
                      label="Select caste"
                      placeholder="Caste"
                    />
                  )}
                />
);

import { Button } from "@material-ui/core";
import Autocomplete from "@material-ui/core/Autocomplete";
import { red } from "@material-ui/core/colors";
import Container from "@material-ui/core/Container";
import CssBaseline from "@material-ui/core/CssBaseline";
import { makeStyles } from "@material-ui/core/styles";
import TextField from "@material-ui/core/TextField";
import AdapterDateFns from "@material-ui/lab/AdapterDateFns";
import LocalizationProvider from "@material-ui/lab/LocalizationProvider";
import React, { useEffect, useState } from "react";
import { Controller, useForm } from "react-hook-form";


export default function App() {
  const [itemList, setItemList] = useState([]);
  // const classes = useStyles();

  const {
    control,
    handleSubmit,
    setValue,
    formState: { errors }
  } = useForm({
    mode: "onChange",
    defaultValues: { item: null }
  });

  const onSubmit = (formInputs) => {
    console.log("formInputs", formInputs);
  };

  useEffect(() => {
    setItemList([
      { id: 1, name: "item1" },
      { id: 2, name: "item2" }
    ]);
    setValue("item", { id: 3, name: "item3" });
  }, [setValue]);

  return (
    <LocalizationProvider dateAdapter={AdapterDateFns}>
      <Container component="main" maxWidth="xs">
        <CssBaseline />

        <form onSubmit={handleSubmit(onSubmit)} noValidate>
          <Controller
            control={control}
            name="item"
            rules={{ required: true }}
            render={({ field: { onChange, value } }) => (
              <Autocomplete
                onChange={(event, item) => {
                  onChange(item);
                }}
                value={value}
                options={itemList}
                getOptionLabel={(item) => (item.name ? item.name : "")}
                getOptionSelected={(option, value) =>
                  value === undefined || value === "" || option.id === value.id
                }
                renderInput={(params) => (
                  <TextField
                    {...params}
                    label="items"
                    margin="normal"
                    variant="outlined"
                    error={!!errors.item}
                    helperText={errors.item && "item required"}
                    required
                  />
                )}
              />
            )}
          />

          <button
            onClick={() => {
              setValue("item", { id: 1, name: "item1" });
            }}
          >
            setValue
          </button>

          <Button
            type="submit"
            fullWidth
            size="large"
            variant="contained"
            color="primary"
            // className={classes.submit}
          >
            submit
          </Button>
        </form>
      </Container>
    </LocalizationProvider>
  );
}