The adaptive cruise control system maintains the appropriate distance to the lead vehicle when the lead vehicle exists and maintains the desired speed when no lead vehicle is detected. A virtual lead vehicle scheme is introduced to make the switching between the speed control algorithm and the distance control algorithm unnecessary and simplify the structure of the control system. The speed and the position of the virtual vehicle can be decided by the control system according to the current situation. Smoother responses are achieved by the virtual lead vehicle scheme compared to the conventional mode switching scheme. This method is also shown to provide a good reaction for when a lead vehicle cuts in or out. A linear quadratic controller with variable weights is suggested to control the virtual lead vehicle. This scheme shows improved performance in terms of passenger comfort and fuel efficiency of the host vehicle.