This paper introduces a model-based adaptive controller designed to compensate mixture ratio dynamics in an SI engine. In the basic model the combined dynamics of wall-wetting and oxygen sensor have to be considered because the only information about process dynamics originates from measuring exhaust λ. The controller design is based on the principles of indirect Model Reference Adaptive Control (MRAC). The indirect approach connotes that explicit identification of the system parameters is required for the determination of the controller parameters.Due to nonlinearities and delays inherent in the process dynamics, an adaptive extended Kalman filter is used for identification purposes. The Kalman filter method has already been described in detail within an earlier paper . It proves to be ideally suited to deal with nonlinear identification problems.The estimated parameters are further used to tune an adaptive observer for wall-wetting dynamics. This observer provides us with an estimate for fuel residing in a cylinder, which is actually the quantity to be controlled.In practical experiments, performed on a sequentially injected 3.5 liter, six cylinder BMW engine, the proposed method proves to be a feasible approach to improve transient mixture ratio behavior.