This paper proposes a nonlinear adaptive sliding mode control that aims to improve vehicle handling through a Steer-By-Wire system. The designed sliding mode control, which is insensitive to system uncertainties, offers an adaptive sliding gain to eliminate the precise determination of the bound of uncertainties. The sliding gain value is calculated using a simple adaptation algorithm that does not require extensive computational load. Achieving the improved handling characteristics requires both accurate state estimation and well-controlled steering inputs from the Steer-By-Wire system. A second order sliding mode observer provides accurate estimation of lateral and longitudinal velocities while the driver steering angle and yaw rate are available from the automotive sensors. A complete stability analysis based on Lyapunov theory has been presented to guarantee closed loop stability. The simulation results confirmed that the proposed adaptive robust controller not only improves vehicle handling performance but also reduces the chattering problem in the presence of uncertainties in tire cornering stiffness.