We study the velocity distribution of Milky Way disk stars in a kiloparsec-sized region around the Sun , based on \sim 2 million M-type stars from DR7 of SDSS , which have newly re-calibrated absolute proper motions from combining SDSS positions with the USNO-B catalogue . We estimate photometric distances to all stars , accurate to \sim 20 \% , and combine them with the proper motions to derive tangential velocities for this kinematically unbiased sample of stars . Based on a statistical de-projection method we then derive the vertical profiles ( to heights of Z = 800 pc above the disk plane ) for the first and second moments of the three dimensional stellar velocity distribution . We find that \langle W \rangle = -7 \pm 1 km/s and \langle U \rangle = -9 \pm 1 km/s , independent of height above the mid-plane , reflecting the Sun ’ s motion with respect to the local standard of rest . In contrast , \langle V \rangle changes distinctly from -20 \pm 2 km/s in the mid-plane to \langle V \rangle = -32 km/s at Z = 800 pc , reflecting an asymmetric drift of the stellar mean velocity that increases with height . All three components of the M-star velocity dispersion show a strong linear rise away from the mid-plane , most notably \sigma _ { ZZ } , which grows from 18 km/s ( Z = 0 ) to 40 km/s ( at Z = 800 pc ) . We determine the orientation of the velocity ellipsoid , and find a significant vertex deviation of 20 to 25 degrees , which decreases only slightly to heights of Z = 800 pc . Away from the mid-plane , our sample exhibits a remarkably large tilt of the velocity ellipsoid towards the Galactic plane , which reaches 20 ^ { \circ } at Z = 800 pc and which is not easily explained . Finally , we determine the ratio \sigma ^ { 2 } _ { \phi \phi } / \sigma ^ { 2 } _ { RR } near the mid-plane , which in the epicyclic approximation implies an almost perfectly flat rotation curve at the Solar radius .